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London Land Prices

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Does anyone have any information on land prices in London?

I would assume that as newbuilds become harder to sell that the land set aside for such large developments would not be so keenly pursued by investors and consequently prices may be coming down. On the other hand it is London.

If anyone has any ideas where I could find out more please let me know a.s.a.p. :)

One other thing, do you think the same statistics, graphs and arguments regarding house prices can be legitimately applied to land prices? If not, why not?

Any help very much appreciated.


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Residential building land report

Inner London

Generally, the residential market remains uncertain and difficult to value, and there has been a distinct lack of transactions across London. There is clear demand, however, for small sites where there is no requirement to provide affordable housing. Any large scheme can be expected to attract interest from the major developers but the affordable housing requirement and degree of funding available results in a final transaction price being site specific and difficult to translate to other sites except in the broadest of terms.

There has been no evidence of sales of sites in Maida Vale and Paddington, and a general slow down in the residential market for this location, with little activity, and flat market conditions. All potential sites in this location are brownfield land and developers are increasingly concerned about the costs and risks associated with contamination/cleanup, infrastructure and relocation of existing occupations/uses related with such sites. On the whole the brownfield market is not as attractive as the greenfield market. However there is no evidence to suggest a fall in value, the limited supply for sites probably keeping the values level.

In Kensington and Chelsea there is no sales evidence for bare sites. Whilst the market in second hand property is still falling generally, demand for any bare site coming onto the market in Chelsea is still such that the price per hectare will be maintained due to the scarcity factor for such prime sites. There is a large-scale flat redevelopment nearing completion in W8. Although demand for property is not as strong as one to two years ago, it is not considered there has yet been an impact upon residential land values in the area.

In Hammersmith, again there are no sales of bare sites for development. Although second hand property is experiencing falls in value, such decreases have yet to be reflected in land values, due to scarcity of bare land in the borough.

Commentaries for Hackney, Islington, Newham, and Tower Hamlets last year emphasised the local and central governmental pressures fuelling higher residential densities and thus development land values. Inner City Boroughs seldom reject schemes on density grounds alone, particularly where significant affordable/key-worker housing is achievable and a socially beneficial land use (e.g. primary healthcare) can be incorporated into a scheme. A combination of a thriving housing market and densities well beyond UDP norms has produced a strong residential land market in recent years.

The balance of these factors is now potentially more unsettled and developers faced with uncertain receipts and escalating building costs could potentially increase their inbuilt risk/profit element as a result, reducing the sums available to purchase development land. This possibility is currently being reflected in a reduced number of transactions, rather than an actual decline in residential land values.

It is noticeable that mixed-use schemes appear to be increasingly prevalent, a combination perhaps of both planners’ requirements and developers spreading their risk. Disposal of former Local Authority and Hospital land particularly promotes this type of scheme, often with the inclusion of a socially beneficial land use (e.g. health/education) by virtue of Section 106 or otherwise.

Notwithstanding the geographical factors specifically influencing these locations, the general trends described above are considered to have created a period of stability in the residential land market.

In Lambeth and Southwark the market for residential land has continued to show signs of slowing over the past six months. There have been fewer land transactions in recent months and most of the significant transactions have been to public sector builders.

Affordable housing remains a significant factor and one that private developers were able to accommodate relatively easily when the market was rising. However, the current market is static, with some predictions of a fall, and so developers are unwilling to take the potential financial risk of purchasing sites and then having to provide low-cost units whilst suffering a loss of profit from falling values.

In Wandsworth developers would appear to be taking a cautious approach across the borough. The few sites that have been sold are small infill sites of around 0.1 hectare. The second hand market has now stabilised, with some prices falling, and this is expected to be mirrored in residential land, though any prominent site brought to the market, particularly with river frontage, can still be expected to command a premium.

Outer London

In Barking & Dagenham, Havering, Redbridge and Waltham Forest, the housing market has slowed over the last twelve month period, with housing sale values in the last six month period being static. Demand for “good” building land however remains strong, although values do vary greatly, and are site specific. There have been very few recorded land transactions over the last six month period, the majority being small infill sites and land for flat development. Due to increased urban densities and land scarcity, values have continued to rise, but as mentioned above, values are wide ranging and are very site specific.

In Hounslow and Ealing generally, a sluggish end-product market is leading to some uncertainties in the market for the raw material, namely the land. However, developers need land to maintain their raison d'etre of building houses/ flats. Accordingly, although sites are still being sold and deals done, values remain on a plateau, and there is no sign of a collapse. Within this general pattern there are always some special cases. Feltham, for example, with its town centre re-development may become a focus for residential developers' interest

In Enfield, Barnet and Haringey, once again there have been few transactions of any size, with most being of small infill or brownfield sites. Purchasers are seemingly prepared to buy land even when the planning situation is uncertain or contamination means site rehabilitation costs may be high. There is no evidence yet that the reported slow down in the housing market has fed through to land sales.

In Brent, Harrow & Hillingdon there has been little evidence available in the area and the sales that do take place tend to be for flats/apartments in secure developments.

Sales of second hand houses have slowed, but in general prices have been maintained, and this has kept demand keen for small sites and infill plots. There has been some local demand for house and garden extensions. Agents report that demand for larger sites has been somewhat muted but there is no evidence of reduced prices, though it is expected that values will be fine-tuned to reflect any additional costs that may arise.

In Kingston, Merton and Richmond there is no direct sales evidence, and the developments in course of construction would seem to be a result of earlier land purchases. These are all small schemes without the impact of affordable housing. There is now evidence that the second hand housing market has reached a plateau, and modest falls are being recorded. With the uncertain housing market and increased construction costs, it is expected that land prices will remain static, or possibly fall if there is pressure to provide additional affordable housing.

In Bromley, Croydon and Sutton the pressure continues for purchase of existing single houses on large plots for demolition and replacement with several houses, particularly in Bromley. Such development is likely to be below the level at which affordable housing is required. There is also intense pressure for back land development, with planning consent being granted for access via very narrow gaps between established frontages, including rear of tertiary shopping streets.

Of the larger sites 'Aquilla' Bickley Kent (former MOD research huts long since closed and removed), is underway with about 280 new houses of various types with one flank of this huge site set aside to satisfy affordable housing.

In Bexley, Greenwich and Lewisham, there has been little tangible evidence, and most developments in hand would seem to be from historic land acquisitions. Nevertheless strong interest can still be expected in sites overlooking the Thames in all three boroughs.

Whilst it is believed that residential land is still selling, as yet, confirmed sales have not been reported. The current slow down in residential sales of completed developments can be expected to keep values static at best, and changing political and macro economic variables are likely to dampen values further.

Edited by ILBB

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