Greenfield land prices flourish – but central London slumps

By Vivienne Shirley, Senior Consultant

Knight Frank has released its latest Residential Development Land Index for Q2 2018, showing the biggest annual rise in greenfield land prices in England since 2014.

Prices rose by 2.1% on average in Q2 of 2018, taking the annual growth to 4.6% – the strongest seen in four years. This has been largely propelled by demand from developers in the South West and the Midlands, particularly in areas that are desirable to homeowners now or due to benefit from infrastructure improvements in the near future.

Justin Gaze, Head of Residential Development Land at Knight Frank, noted: “Sites which can be delivered up to 2021, and which will benefit from Help to Buy, are most attractive. Beyond this timeframe, policy uncertainty is causing a level of hesitance.”

However, the picture is not as rosy elsewhere with prime central London development land prices falling 1.4% in Q2, contributing to an annual change of -3.5%.

This is partly attributed to the Greater London Authority’s 35% affordable housing requirement, which is pushing some developers to build in the provinces instead.

The capital’s biggest home builder, Berkeley, which only bought one new development site in the London in 2017, recently stated to shareholders: “It is telling that some funders and builders are choosing to exit the market when faced with the degree of risk and regulation that now confronts development in the capital.”

The risk of a no-deal Brexit is also likely blunting developers’ appetite for building in London.

Jonathan Samuels, chief executive of home loans company Octane Capital, explained, “Given that the London property market is heavily exposed to big business and international buyers, if both begin to retreat in the event of a no-deal Brexit, prices in the capital could suffer disproportionately.”