Uncertainty in the wake of the EU referendum – surely amplified by this morning’s news from the States – is causing developers and investors to hold off from bidding on development sites, reports Savills.
This drop in demand means that values are either stagnating or falling; UK greenfield development land values fell by 0.4% in Q3 2016, whilst urban land values increased only slightly, by 0.1% in the last three months.
Central London looks to be particularly quiet, and is “behaving very differently from the rest of the country”, says the agency. Falling house prices here have pushed residential development land values down more sharply than elsewhere; there’s been a significant 8.9% decrease in the last six months; that’s the largest fall since 2008/09. Values have now fallen by 10.2% in the last year.
Super-prime locations in Mayfair and Knightsbridge have felt the greatest impact; Savills’ Prime Central London house price index shows that secondhand house prices have fallen by 10.6% since the 2014 peak, in large part due to stamp duty changes.
Office development land values have also dropped in central London, falling by 5.9% in the last six months “due to the risk of occupational demand as a result of the Brexit vote”.
There are, however pockets of sustained demand. Outer London and “connected markets” in the South and central Birmingham have seen development land values rise over the last quarter. Savills reports that some outer London areas (not currently covered by its index) “are seeing some of the strongest demand for land and values are more stable”.