The price of development land in the South East rises despite gloomy economic outlook
According to a recent study by real estate consultants Savills, development site values in the South East of England have been steady - and even rising slightly - despite the challenging economic outlook.
Savills' most recent development land index shows that urban land values climbed by 8% over a 12 month period, whereas greenfield site prices in the South East experienced an average price gain of 4.6%. In the wider country, urban land value had grown by 6.2% and greenfield land by 6.3%.
The mood has dwindled somewhat across the UK land market, with a net balance of +40% of development agents reporting a favourable market environment in Q3 2022, down from +74% in Q2 of this year.
Tim Watson, joint head of Savills South Central Development, had this to say about the news: "Recent disruption to the UK economy is undoubtedly starting to have an impact on the land market. These headwinds, including cost inflation and the rising cost of borrowing, are likely to have a particularly significant effect on smaller to medium-sized housebuilders, especially those that are highly geared."
“However, despite the more challenging climate, stock constraints continue to sustain competition to some extent, and well-designed sites in primary locations remain highly sought-after."
Ed Keeling, the other joint head of Savills South Central Development, adds: "A shortage of sites and continued demand for land from a range of parties has supported a robust market here in the Thames Valley. In the last few weeks alone we completed on three major transactions in Oxfordshire and Berkshire at a total value of £122 million, demonstrating the commitment we have seen from buyers for the right site in the right location."
"However, mounting pressures are now starting to subdue growth. After a period of exceptional strength, house prices are expected to fall, build costs are continuing to rise, the cost of debt is increasing and Help to Buy is ending. Looking forward, increased tender prices are unlikely to be offset by house price inflation."
Main image courtesy of Creative Commons Licence/Geograph
READ MORE: Pressure mounts but South East land values still increase
