Land values fall by up to 64% across the UK
Land earmarked for housing development has halved in value since the height of the boom, according to the latest research from estate agents Knight Frank.
The study said the value of residential development land had slumped by 15% in the last quarter of 2008 alone, as housebuilders attempt to off-load sites to shore up their balance sheets.
Head of development research Jon Neale said he expected land values to fall a further 10% before stabilising in the summer. In general he said that while very few transactions were currently taking place, the conditions were being created for a “very large scale transfer of development land,” from housebuilders to private investors, landowners and the public sector.
The research found land had slumped in value most significantly in Yorkshire and the Humber, recording a 64% fall, with the smallest falls being found in outer London, seeing only a 40% drop. However, he said no area was immune from the effects of shut-down in mortgage lending and the consequent decline in house-prices.
During the last quarter of 2008 the biggest loser was central London, recording falls of 33%, after having previously remained resilient to the downturn.
Development land values tend to fall faster than house prices, because it is not possible to cut the construction costs of homes by a large amount, so the majority of the fall in house prices ends up coming off the land value.
Neale said that most landowners were not selling, increasing the danger that the fall in prices will stop the government from hitting housing targets.
He said: “Very few developers have cash or can access bank finance, and those that are in a position to buy are adopting an extremely cautious strategy. Only extremely well-located sites, or those suited for larger family homes, are attracting interest – or, indeed, qualify for bank backing.”
“There are very few sales occurring at this moment in time. However, many players believe fair value is approaching and we believe prices have a further 10% to fall before stabilising over the summer. After this point, transactions should become more commonplace.”
