South: Land values in the south boosted by improved economic conditions, says CBRE
CBRE’s latest residential development research shows improving consumer sentiment and government initiatives are resulting in a more fluid new-build sales market, which is feeding through to an upswing in land values for the best sites. According to the findings , in many parts of the country, particularly in the south, there has been double digit price growth on well-located consented land, albeit from a low base following several years of stagnant growth. Commenting on the housing market, Mark Budden, CBRE’s senior development director for the South Central region, said: "Over the past few months there has been an increasing sense that the worst is over for the UK economy. This was reflected in the Bank of England’s May inflation report which, for the first time in six years, simultaneously revised up its projections for economic growth and revised down its projections for inflation over the next three years. Increased optimism around the UK economy has also helped to boost consumer sentiment.
"Although the impact has yet to be fully felt, the positive effects of the Funding for Lending Scheme (FLS) are slowly seeping through to the housing market. Funding costs have fallen significantly and LIBOR is now below base rate which have had a beneficial impact on mortgage rates, and The Bank of England reports the average rate on 90% fixed rate mortgages has fallen by one percentage point over the year.
"The improvement in underlying conditions in the mortgage market, coupled with the pick-up in consumer confidence, has led to a steady increase in housing market activity. Furthermore, demand for housing has been supported by a modest improvement in employment and the introduction of Help to Buy, which has already generated 7,000 reservations since its launch in April this year.
"As a result, gross mortgage lending increased to the highest level since 2007, according to latest statistics from the Council of Mortgage Lenders; in June home loans totalled £15 billion, up from £14.7b in May and 26% higher than reported in the same month last year. Similarly, Bank of England figures show that mortgage approvals totalled 57,667 in June with a value of £8.7b compared with £8.6b in May.
"This has fed through to house prices; nationally prices were up 1.4% in Q2 of 2013, according to Nationwide. However, regional variation remains with 10 of the 13 UK regions covered by the research seeing annual price rises. London continues to lead the way with 5.2% growth, as values climb to record highs, with the south recording increases of just over 2%."
Commenting on markets in the south, Budden continued: "The south has seen a pronounced increase in activity this year from housebuilders, regional developers and property companies seeking opportunities to buy land. In the light of increased competition for land, landowners are now arranging sales of relatively major residential sites – something which has not been seen for many years.
"Over the past couple of months, the best de-risked prime greenfield sites in the region with consents have seen their value increase significantly through competitive tender situations. As a consequence, and due to land supply deficits and NPPF, landowners are now taking the opportunity of arranging sales on a subject-to-planning basis. In contrast, very large strategic projects requiring significant up-front infrastructure spend are less popular. Generally though, the market for residential land in the south is currently strong with higher levels of activity being experienced than at any time in the past four to five years and higher levels of value being realised."
