Residential Building Land Report - Wales

Demand for residential land in the main centres along the M4 corridor remains at a high level with values continuing to reach new heights, particularly in Cardiff . However, the most spectacular growth over the last six to twelve months has been seen in areas traditionally considered to be of little interest to the national house builders, such as some former mining communities in the Valleys. Land values here have not so much risen as jumped, as developers seek to satisfy the demand for new houses from people who are prepared to travel further to work in return for not paying the premium prices of property in the main centres.

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.