Demand and the value of residential development land is continuing to heat up across the UK, according to the latest national research from Savills.
Underpinning the increase in residential land value is its proximity to an expanding employment hub; where there are job opportunities and an established corporate infrastructure, it has a positive impact on the premium housebuilders are willing to pay for local site development opportunities.
Birmingham leading the private rental sector
Birmingham is the star performer, where over the last year urban land value growth has risen by 6.3%. Some of the city’s central spots have seen the value of land double in 12 months with a drive to regenerate the city centre, increasing investment from major institutions and a focus on building high density developments.
The research identifies that other factors including the Commonwealth Games and HS2 are attracting more investment into Birmingham, while there is a huge appetite for private rentals which has grown fivefold over the last five years. There are also seven build-to-rent schemes underway. Savills’ research predicts that house prices in the area are set to increase by a further 15% over the coming five years.
Knocking on the Midlands’ door
Elsewhere in the Midlands in Coventry, Solihull and Leamington Spa, land values have increased by more than 7% in the last year, supported by a growth in house prices well in excess of the national average of 4.1%. Coventry’s property values have grown by 8.5%, with Solihull recording a rise of 7.6% and Leamington Spa clocking up 5.1%.
Scotland is also coming out on top, where the value of greenfield land over the past year is up by 2.8% since the end of March 2018.
Housebuilders venturing out to extended commuter belt
As London experiences a sluggish property market and developers are hampered by tighter planning restrictions, increasingly they are venturing beyond the capital to the extended commuter belt. Towns including Reading, Chelmsford and Luton offer the potential for property values to rise and there are more sites available for acquisition within these commutable towns, ideal for “flatted developments”, which is an ongoing preference for housebuilders.
Emily Williams, senior residential researcher at Savills, said: “Over the past five years, average green field land values across the UK have risen by a total of 21.2%, significantly below new-build house price growth. Over Q1 of 2018, greenfield land values rose by an average 0.8%, taking annual growth to 2.1%, fuelled by house price growth of 5% compared to just 1.7% in Greater London. This indicates the potential for further land value growth, particularly in housing markets of the major cities where there is a genuine lack of supply.”