The price of development land for homes in the UK is increasing across much of the country but has fallen in certain parts of London, new research shows.
Average greenfield development land prices rose by 2.1% in the second quarter of 2018, taking the annual growth to 4.6%, the strongest rise since the second quarter of 2014.
The data from Knight Frank’s residential development land index also shows that urban brownfield development land prices edged up 0.4%, unchanged from the previous quarter, taking annual growth to 5.5%.
However, the figures also shows that prime central London development land prices fell by 1.4% in the second quarter, a fall of 3.5% on an annual basis.
A breakdown of sites within the Knight Frank index shows that growth has been propelled by markets in the Midlands and the South West, and the firm’s recent national house building report showed that developers saw the South West and Midlands as areas of opportunity for development over the next three years.
‘Timing is playing a part in the market. Sites which can be delivered up to 2021, and which will benefit from Help to Buy, are most attractive. Beyond this timeframe, policy uncertainty is causing a level of hesitance,’ said Justin Gaze, head of residential development land at Knight Frank.
‘At the same time, demand in regional cities, especially where land prices are coming from a low base, is also picking up. However the cost of materials and labour continues to weigh on pricing in all parts of the market,’ he added.
According to David Fenton, head of regional land at Knight Frank, house builders continue to be inquisitive in the right areas, predominantly judged on factors such as employment and transport connections. ‘The M1 corridor is one such example, with exceptional links into London allowing people to commute with ease and bring up their families in a desirable environment,’ he pointed out.