Residential land prices in England and Wales see turnaround

LONDON: Development land values in England and Wales posted a fourth consecutive quarter of growth in the last three months of 2013, translating to a turnaround from the previous year when land prices were relatively stagnant, reported Knight Frank in its latest Residential Development Land Index.

Values for residential development land in England and Wales experienced a 2.7% increase between October and December in 2013 resulting in a 7.1% improvement for the entire year. Prime central London prices increased 7.7% in 2013, up from 12.2% in 2011.

According to Grainne Gilmore, Knight Frank’s head of UK residential research, the upward trend in development land values mirrors those seen in house prices across the UK in 2013.

She added that according to Nationwide Building Society, a British mutual financial institution and the largest building society in the UK, house prices rose 8.4% last year, with a 2.2% increase in 4Q13.

“The price increase reflects increased activity in the market which has been boosted by the introduction of the Help-to-Buy Equity Loan scheme in April last year,” said Gilmore.

Help-to-Buy is a series of UK government schemes aimed at helping homebuyers without a large deposit to get a mortgage. The assistance is provided through either an equity loan or a mortgage guarantee.

Gilmore said the most recent government data on this scheme shows nearly 13,000 buyers of new homes purchased between April and December 2013 used the equity loan.

“These sales were reasonably and evenly spread across England and Wales with 12% of the loans taken up in the northwest, while 17% was taken up in the southeast,” she added.

Based on an analysis of new data retrieved from the Land Registry Department for England and Wales, Knight Frank said the number of sales of new homes in England and Wales had increased 8% between April and the end of September 2013 compared with the same period the previous year.

“As market activity has stepped up, developers have seen their cost of capital reduced as they are able to sell their stock more quickly and are effectively holding land for shorter periods of time. This allows room for land values to rise,” said Gilmore.

Development land prices in prime central London rose 1.9% in the final three months of 2013, a much more modest increase than the 4.5% rise witnessed in 3Q13 and 4% in 2Q13.

“In fact, this is the most modest uptick since the final quarter of 2013. This reflects the slight slowdown in the pace of growth in property prices for prime central London property,” said Gilmore.


This article first appeared in The Edge Financial Daily, on March 14, 2014.