Residential Building Land Report - East Midlands

Within Northamptonshire the residential land market remains strong although the view of the local agents is that it seems to have reached its maximum for the time being. This would seem consistent with the perceived levelling off of prices within the Northampton house market over the last couple of months.

Both Corby and Wellingborough appear to be experiencing a relatively buoyant period with the regeneration of Corby slowly becoming a reality and the development known as Wellingborough East close to commencement. The adjacent East Northamptonshire Council has placed an embargo on granting planning permission for greenfield development.

The local housing market in Derbyshire has slowed quite considerably in recent months with an apparent consequent impact on residential land sales. If there is little or no prospect of increasing property prices, there is little chance of increasing land values in most cases. There appears still to be strong demand for good sites, but little actual evidence to show increased values from those reported in July 2004, for virtually all locations in the county.

Similarly, Nottinghamshire has also seen the local housing market apparently level out since the summer of 2004, with property prices not showing any real increase. There is little actual evidence to suggest an increase in values in most parts of the county. There may be pockets, which contradict the overall trend, but generally values of residential building land appear to have remained static during the period since the last report in July 2004.

Few purchases of bulk land and larger sites have taken place in Leicestershire over the last six months, possibly as a result of an increasingly uncertain future for the residential property market. In central areas of Leicester City the provision of new high quality student accommodation is very close to saturation point. Initial development phases of fashionable high value apartment and penthouse developments continue, although whether the market will sustain further phases will become clear in the next six to twelve months.

The feeling across much of the country is that house prices have peaked and in some areas there is a suggestion of a slight decline. There is continued uncertainty as to whether houses prices will rise, fall or remain static in the next six to twelve months.

There is generally a continuing lack of supply of residential development land which is particularly apparent in respect of greenfield sites. Many local authorities, particularly across the north of England are reviewing their planning policies, and in the interim have imposed either planning moratoria or, at least, are restricting development to brownfield sites or smaller infill plots. Any developments, which do occur on these sites, are generally at higher densities than would have otherwise been the case.

There is a strong historic link between the fortunes of the housing market and the market for residential development land. Whilst the two markets do not always move in parallel it would be expected that uncertainty in the housing market would be reflected in a decline in the value of residential building land. Developers would normally seek to factor into their development plans the risk of future house price falls and the difficulty in disposing of completed units. The net effect of the residual calculations would be lower sums available for land purchase. However, across many areas it is felt that the lack of supply of available land coupled with continuing long term demand has resulted in residential building land prices holding up, even in areas with falling houses prices.

These opinions of the District Valuers are based on evidence derived from the limited number of land transactions that have occurred over the last six months. The brownfield sites and infill plots that have sold often have particular abnormal sites conditions to overcome that impact on the net amount of money a developer is prepared to commit to the site acquisition. Further, the attitude to affordable housing differs between local authorities and in some cases is site specific and negotiable.

All these factors make analysis and comparison between sites a challenge with the result that the market is increasingly difficult to value in general terms. Each site now has its own individual planning brief and additional planning requirements, including the provision of social housing, to the extent that land values are increasingly site specific.

The trends in the residential building land market may become clearer in the spring once price movements in the housing market itself become apparent and the longer term planning policies of many local authorities are finalised.