Residential Development Land Prices in UK Remain Flat in Q1

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According to London-based Knight Frank, UK land prices remained stable in the first three months of the year, reflecting the wider movement in house prices, which have also remained broadly static. This comes after a 1.3% rise in development land values in 2011.

Land prices fell in the North West between January and March, while prices in the West Midlands and Greater London picked up. Prices in all other regions remained unchanged.

Results for Q1 2012 include:

• The average value of residential land remained unchanged in UK in Q1, after a 1.3% rise in Q4 2011

• Prime central London development land prices also remained static in the first quarter

• Demand for residential land in the UK still outstrips limited supply.

As home builders reported in their trading updates over the past month, viewings and sales have been positive across the board during the start of the year, suggesting a market which continues to recover from the trough seen in 2009 in the aftermath of the financial crisis.

"House builders are still absorbing the potential impact of the Community Infrastructure Levy", said Gráinne Gilmore, Head of UK Residential Research of Knight Frank.

But supply remains very limited - a reflection of the slowdown in the number of landowners applying for planning in 2009 and 2010. As a result, there are fewer sites with planning consent available. In addition, given the introduction of new planning rules, it is now taking longer to achieve planning in many areas, further exacerbating the lack of supply.

House builders are still absorbing the potential impact of the Community Infrastructure Levy (CIL), which could weigh on land prices outside London. Furthermore it may deter land owners from putting their land up for sale at this stage in the market.

Prime Central London:

The first quarter saw a relatively flat market from a pricing perspective. This contrasted with demand as buyers continued to demonstrate a good appetite for sensibly priced opportunities.

Developers and investors alike remain keen to secure schemes. However their approach is one of realism as they are aware that unsupportable assumptions will not find favor with their funding sources.

Average property prices in prime central London rose by 2.7% in the first three months of the year.