Strong demand for residential land in areas where ‘housing need is greatest’

The average price of urban brownfield land rose 1.2% in the second quarter of 2017, and by 6.3% year-on-year, fresh data shows.

Growth was fuelled primarily by large regional cities, including Birmingham, Manchester and Leeds, where property prices are generally surging, according to the latest figures from Knight Frank.

But while urban prices continued to rise, English greenfield land prices fell by 0.3% in Q2, but posted a 0.7% annual rise in the year to June, which is the first time the annual change in land prices for greenfield sites has been in positive territory since the end of December 2014.

While the factors that have weighed on land prices, not least construction costs and the cost of planning, are still evident, there is evidence of improving demand, especially in areas where the demand for new housing is high, and this has to some extent, put a floor under pricing.

“There is evidence of strong demand for greenfield and brownfield development land across the country in areas where the housing need is greatest,” said Grainne Gilmore, head of UK residential research.

After rising by nearly 50% between September 2011 and June 2015, development land prices have fallen by a cumulative 13% in the prime central London residential development land market, but there are signs that prices are starting to ‘flatten out’, with values having now been unchanged for two quarters after five consecutive quarters of price falls.

But the 3.5% annual decline in pricing shown by the index, which is collated, using the valuations of a basket of development sites across central London, can only ever give a picture of what average declines are.

Ian Marris, joint head of residential development at Knight Frank, said, “We have seen sites in some locations hold their value over the last year, showing no change in price, while in others, prices may have fallen by as much as 6% over the same time. Location and quality of opportunity on development sites are more important factors in determining land pricing than ever before. Value as ever, is in the detail.”

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