Residential Building Land Report - Merseyside

The recent auction results for residential property suggest the Liverpool market has slowed considerably over the last six months. In addition, there is a move towards the use of more brownfield sites rather than the purchase of new sites for residential development. This is emphasised by Liverpool City Council having imposed a moratorium on new house construction in many areas of the city from August. The longer term planning strategy is awaited.

The slowing of the housing market and the planning moratorium has impacted on the market for residential building land with the few sales making it difficult to discern any value trends, although it is felt that the market has not risen over the last six months. Amongst the limited evidence is the sale of a 0.31-hectare site for residential development in L15 that achieved a price equating to £1.935 million per hectare.

The Birkenhead market continues to perform well, with a particular emphasis on brownfield sites, and with many small and infill plots achieving good prices. In the more affluent western area of the Wirral, residential land is at a premium and the, mostly small, sites still sell quickly and for high prices.

In Warrington there is substantial ongoing and planned development in and around the town centre, with other brownfield sites mainly in Warrington North and Chapelford Village also coming to the market. There is a lack of evidence suggesting a rise in residential land values, but with a general planning moratorium on other new house construction, it is considered available land with consent may now attract a premium, particularly in Warrington South.

Within St Helens , the nature of individuallocations and site conditions result in wide variances in price, but a lack of recent transactions make it difficult to support an overall increase in land values over the last six months. The number of windfall sites has increased substantially in the last few years and a large number of planning applications are outstanding. As with some other local authorities the Council is seeking to limit residential development through planning restrictions, which may lead to premium prices for land with planning permission.

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.