After another year of tumbling development land values in Prime Central London, it’s being suggested that we could be approaching the bottom of the market.
A -2.5% decline in the final quarter of 2016 has taken the annual movement to -11.5%, leading Knight Frank to draw some comparisons with 2010, when investors returned to the table in their droves after seeing prices freefall for a couple of years.
PCL is still absorbing those major changes made to the stamp duty regime over the last two years, reiterates the firm, and medium-term Brexit-related uncertainty is causing developers to add in higher margins – all of which has put the squeeze on land prices.
This uncertainty is also affecting land prices across the country, and average values for greenfield resi development land sites around England fell for the fifth consecutive quarter in Q4. Knight Frank’s greenfield index is now -7% down on its Q4 2014 peak, and sitting around the levels last seen in Q1 2013.
Knight Frank’s Ian Marris: “The market for land in PCL is showing signs of conditions last seen in 2010 where, after two years of falls, the savvy investors returned to the market and bought in expectation that pricing was reaching the bottom. It is probably a little premature to make the same conclusion however it feels like it is close and we can certainly see value returning to development appraisals.”
Meanwhile, the urban brownfield land market – measured across five major cities – is reading from a different script, and has now posted growth of 18% over the last two years, with Birmingham leading from the front.
Grainne Gilmore, Head of UK Residential Research: “Amid wider economic uncertainties, the prospect of regeneration, potential transport uplifts, and a positive local economic picture can underpin land pricing.”