London and beyond

Over the last six months, there has been a shift in direction of the residential development land market. Urban locations with London links are increasingly being sought by developers as they look for opportunities beyond London.

London

London has seen much slower growth in land prices over the six months to September than the previous half year. Values for residential land in London rose by 4.1% from Q1 to Q3 this year compared to 15.2% in six months to March. The slower increase in the value of residential land follows the cooling housing market in the capital over the same period. Sites with good transport links across all zones however are still highly sought after.

Beyond London

As land in London has become more expensive, reflecting the competition for sites, investors and developers are looking beyond the city for more affordable land and a greater opportunity for return.

"Places in the Midlands have stood out as having seen strong growth in urban land values"

The main flow of this movement is the south western corridor from London out to commuter hotspots, Guildford, Woking and Farnborough. London based developers as well as those from other regions are interested in investing in the area. Values for urban land in Guildford and Woking are amongst the highest outside London, but despite this they have seen steady growth of 2.4% over the last quarter (5.5% in the last year).

Other cities have seen the influence of developers investing in land from London. An example is Manchester which two years ago only saw regional interest. Development land in Manchester has seen growth for the second quarter in a row after six years of stagnation. Many parties are now interested in land in and around the city although access to finance remains a potential barrier to delivery of homes.

Urban land has seen stronger growth in the last quarter having previously lagged behind the growth seen for greenfield development land since the downturn. Along with Manchester, places in the Midlands, such as Northampton, Nottingham, Leicester and Derby, have stood out as having seen strong growth in urban values, into double digit percentage figures in some cases, indicating that the market has picked up again.

Further south, Cambridge has seen increased growth in urban land values along with a large volume of development in recent years. The development is supported by a strong and growing local economy, a significant London commuter base and its vibrant historic centre.

Construction on urban extensions in Cambridge began at the end of 2011, and an additional 5,000 units will be built in and around the city in the next five years. Sales rates here have been the highest in the country outside London, indicating a strong demand for property.

Not all of the UK is seeing land value increase and in many places land values have remained stable, particularly where there has been high supply of consented land. One example is Telford, where there has been a high supply of sites controlled by the HCA.

Taken from
Market in Minutes: UK Residential Development Land - Nov 2014