Average greenfield land values in England climbed 0.9% during Q1 2018, aided by demand for oven-ready sites with access to infrastructure, according to Knight Frank’s latest data. This took the annual change to 2.2%, down from 2.6% in the year to Q4 2017.
Uncertainty over the future of Britain’s relationship with the European Union is likely to weigh on future growth in values, with housebuilders taking an increasingly selective approach when bidding for land as they adjust to perceived risk in the market.
The Help to Buy Equity Loan scheme has continued to contribute to sales rates, though developers are now embarking on projects due to complete after 2021 – when the scheme is currently stated to end. Uncertainty over the future of the policy is likely to be reflected in English greenfield land values in the coming quarters, coupled with housebuilders factoring into their margins the unclear economic picture ahead.
Growth in urban brownfield land values moderated during the quarter, climbing 0.4%. This follows a strong final quarter of 2017, when values rose 4.9%, amid positive sentiment and robust employment growth in the UK’s major cities – particularly in Birmingham. Values have climbed 6.4% during the past twelve months.
Those fundamentals that underpinned demand in Q4 remain unchanged. However, high build costs are increasingly limiting what developers are willing to pay for land.
Development land prices in prime central London remained unchanged during Q1 2018, taking the annual change to -2.1%.
Though trading volumes remain lower than in previous years, a number of large sites have been put on the market following the Christmas lull, which should provide a strong indication of the strength of the market, and whether larger developers are re-committing to Zones 1&2.
The GLA Affordable Housing policy – allowing developers to fast-track through the process if they hit a threshold of 35% affordable housing, or 50% on public land – is being digested by the market and the jury is out as to whether this will provide a much need boost to Affordable Housing in the capital.
The spread of prices paid for land sold with planning, compared to land sold without, has widened as developers weigh up risk in a new planning environment.
David Fenton, Knight Frank’s Head of Regional Land, said, “Greenfield development land continues to attract strong interest from the UK’s housebuilders, we are also witnessing a number of new entrants to this marketplace as the affordable housing operators move into the sector.