Residential Building Land Report - Yorkshire and Humber

Barnsley and Doncaster have experienced a slow down in the housing market over the last six months, although this has yet to filter through to the residential land market. It is considered that the land market is now more affected by the densities and type of development demanded of developers by local authorities, than interest rates.

Good sites in good areas remain in demand and command high values, especially where the planning brief requires a high proportion of apartments and flats to be included. Even in less attractive locations there appear to be plenty of buyers willing to take a chance in purchasing smaller sites for development.

In the Sheffield and Rotherham areas there is continuing high demand for the limited supply of land coming onto the market. A recent auction sale by Sheffield Council saw prices of £2.5 million per hectare achieved for inner city and suburban residential sites. These sales confirm the continuing high demand for sites for flats in both the city centre and better suburbs, although local residents are fighting planning applications in the areas away from the city centre.

It is understood Sheffield Wednesday FC hope to sell their training ground in the Hillsborough area, which has a gross site area of approximately 5.66 hectares, for in excess of £2.5 million per hectare on the net developable area. However, the granting of planning permission is not expected for some time.

It is felt the West and North Yorkshire market is facinguncertain times. Builders are aware of falling interest in new housing and are beginning to resort to incentives to "move product" on less interesting sites. This contrasts with their ability to sell everything they built over the last two years.

Escalating material (concrete, steel and brick) costs, and rising labour costs have resulted in housebuilders margins being squeezed. In addition obtaining detailed planning permission is an involved and often negotiated process with affordable housing requirements, in particular, increasing.

There is still a very healthy interest in sites coming to the market, particularly those in popular locations and it is too early to say whether land prices have increased, but they appear, at best, to have levelled off. There remains a high demand for small sites and single plots.

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.