Greenfield costs set to rise

manchesteronline.co.uk, 28/07/05

THE cost of land needed for new homes could be about to change sharply - with the value of "brownfield" land previously built on in towns and cities falling while greenfield land in the country becomes more valuable, says a new survey.

According to leading London and country agents Savills, prices of high quality homes on easier-to-develop greenfield sites could be pushed up by a scarcity of supply.

By contrast, it says, "brownfield" land prices in towns and cities are falling amid worries about clean-up bills, remedial work and growing pressure from planners and politicians to produce "affordable" homes for those unable to buy in the open market.

The report may cause concern because the one sector of the new homes market which has looked shaky in recent months has been urban high-rise developments. There have been fears oversupply could hit prices in some centres.

Savills Research reckons that brownfield land could easily lose 3 per cent - as a UK average - in value this year, while greenfield typically gains 5 per cent. But the fall could be steeper than that.

Yolande Barnes, head of Savills Research, said urban land values could fall further if there was a combination of several factors - high levels of unsold new flats either built or in the planning pipeline, low quality land, site contamination, and uncertainties about planning permissions requiring developers to produce affordable homes for people unable to buy in the open market.

Banks

Savills' warning could have significant impact on the value of the large "land banks" held by some builders - and might affect the new round of takeovers and mergers among big builders which is widely expected in the autumn.

If the trend continued into 2006/7, some urban schemes could see reduced prices - while the most desirable greenfield sites enjoy rising prices.

The forecast, if proved accurate, is a further worry for builders - some of whom are giving away up to 10% of the asking prices of new homes in "perks" and various incentives to keep business moving in a difficult market.

:: The latest Housing Market Report, published by the Housebuilders Federation and based on reports submitted by member firms, says the June market for new homes was an improvement on May - and the industry remains "reasonably optimistic" for the next 12 months.

Planning delays remain an acute problem in many areas, but there has been an improvement in the availability of skilled labour.

The survey detects a "positive balance" of builders who expect to build more new homes in 2005 than 2004 - while the number of builders reporting a fall in sales, against the same period in 2004, is down sharply.

Averaged over the past three months, all the English regions and Scotland saw a fall in net reservations, compared to a year ago. Only Wales saw a rise.

Scotland continues to see higher prices than a year ago, while the North has seen almost no change. But builders in all the other English regions and Wales report prices lower than 12 months ago.