Understanding Residential Land Values in UK

For many years, residential land in the UK remained stable, growing just slightly. However, when looking at land reports that cover the past four to five years, we see a very different story. In fact, in just the past two years, the demand for residential land in the UK has skyrocketed, which has changed land value considerably across the country.

One of the interesting things discovered in recent land reports dates back to 2001 when the Government Office Region published that land value was at an all-time low. The northeast region of the UK was the lowest. However, as you looked at numbers reported for London, you saw a very different picture with land prices being quite high. Looking at the northeast and London areas today, we see that the northeast has increased, making East Midlands the lowest value. However, the values reported for London now show this region being rated just three times higher than East Midlands.

Bridging the gap of land value in the UK specifically for England, Wales, and Scotland is the huge housing boom. To give you an idea of how significant this growth is, consider that from 2001 to the current date, the northeast region has seen a growth of more than 300% while the southeast region has still grown dramatically but only by 140%. To determine these statistics, an analysis of land sales and other market factors were performed.

Keep in mind that just because one area of UK has a limited number of land sales does in no way mean the level of demand has slackened off. To balance out the supply and demand issues over land and housing in the UK, we see a number of steps being taken. For example, the planning authorities overseeing the north region are working by reducing the number of available sites, specifically Greenfield sites. However, the south has experienced less demand for sites primarily because of a somewhat slower housing market. Even so, land in this area remains in short supply.

Most of the land sells seen now are for small, infill plots on which one, possibly two structures for self-build or local builders could be erected. Another option for these smaller plots is small but highly populated developments in which affordable housing or other planning options are not required. For the higher populated needs, planning authorities are working with site specific and affordable housing, as well as some other type of planning gain.

In some cases, Brownfield sites are being looked at, specifically when it comes to the price of a hectare being difficult. Typically, we see the price of land being associated more and more to specific sites, with this being a reflection of obligations and schemes that are hard to translate for other types of sites with anything but very, broad terms and conditions. One of the steps we have seen come to fruition is the Housing Market Renewal Pathfinder project. Created by the Office of the Deputy Prime Minister, this particular plan was developed to revitalize and re-grow Midlands and northland areas.

In fact, we have seen several companies established for the purpose of regeneration, using as much as £1.2bn of the public's money. This money is targeted for spending on the areas of Hull, Merseyside, Stoke-on-Trent, Oldham, and Newcastle between 2004 and 2008. The challenge is that the impact and result taking Brownfield sites and redeveloping them is something that is unknown. Considering that the Regional Planning Guidance has placed restrictions on Greenfield sites, the outcome could be interesting to say the least.

- James M

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