Residential Building Land Report - North West

Around Crewe , whilst there have been far fewer sales than were seen in the previous six months, those that have occurred have been at much higher values. Thescarcity of available residential building land has resulted in more brownfield sites being developed.

Land sales in the final phases of Wychwood Park on the outskirts of Weston have realised figures in excess of £4 million per hectare, although this is felt to be exceptional, with sites more typically achieving £2 million per hectare.

In Chester the general feeling is that, whilst the housing market has passed its peak, housing values remain at historically high levels. In the summer the City Council placed a temporary moratorium on all residential planning applications, having exceeded their allocations with the result that land sales have been very scarce as sellers await clarification of the planning policy. It is anticipated that any new policy will permit some small amounts of family housing and infill development.

New build city centre flats are now oversupplied and builders are offering price discounts. With the reduced demand for this type of high density development the land market has declined from the spectacular prices achieved in the previous 18 months. Pending clarification of the planning policy within the city, house builder demand is being displaced to areas around Chester without moratoria including northeast Wales , mid Cheshire/Crewe and parts of southern Wirral.

The planning moratoria on development imposed in the north west round Lancaster , Wyre, Blackpool and Flyde have resulted in increased demand for those few greenfield sites that are available for development. The anticipation that there will be fewer greenfield sites in the near future has lead to increased the demand from builders for otherwise less attractive brownfield sites. There have been few sales of land for residential development but one sale within the Lancaster area, of a greenfield plot with outline planning consent for residential development, achieved a price equating to £3.2 million per hectare.

Other sales include the sale of 1.3-hectare site in the Wyre District. This site had access difficulties and development was restricted due to a high-pressure gas main running through the site. The sale price of £1.5 million equates to £1.85 million per hectare based on the net developable area.

All the ten local authorities across the East Lancashire area have introduced some planning restrictions. These include a full moratorium on residential development and others restrict development to those areas defined for regeneration or for affordable housing/agricultural workers housing. Consequently only brownfield sites are generally available for residential development and these often suffer from abnormal site conditions. There is a limited supply of, and a significant demand for, sites and this is reflected in the general increase in values, particularly for smaller sites that have doubled in value in some areas over the last twelve to eighteen months.

Although actual completed sales are in short supply it is understood a site of in the vicinity of Blackburn Royal Infirmary has recently sold for circa £1 million per hectare. The site of Sharoe Green Hospital in the Fulwood area of Preston is to be marketed in the near future, with the current moratorium likely to affect any planning consent to be granted. The last significant site in the vicinity achieved £2.5 million per hectare.

In North Cumbria limited supply and strong demand for sites from major house builders has fuelled increases in value far beyond the expectations of vendors. The North Cumbrian market has now broken out of its 'isolation' from the rest of the region, and residential land values match those achieved in other locations in the North West .

Within South Cumbria there is effectively an embargo on granting planning permission for greenfield development. It is understood a 1.6-hectare site at Grange over Sands, which was allocated for residential development in the approved Local Plan, was subsequently de-allocated. The limited availability of sites with permission has increased the negotiating strength of local authorities in determining the "affordable home" element of any new developments that are permitted, including the percentage market value at which these "affordable homes" should be sold. This is currently in the region of 65% of the current market value. The limited site availability has in turn limited the number of new houses coming on to the market, contributing to the recent upward pressure on house prices.

This embargo on greenfield sites has forced developers to consider alternative schemes such as conversion of old mansions or Miners Homes, such as in Blackpool, which they would not have otherwise considered.

The recent slowdown in house-price inflation in Greater Manchester has not been reflected in the level of prices achieved for residential building land. There have been marked uplifts in the prices per hectare achieved in the region, with evidence of large numbers of bidders for sites going to tender. This may well indicate some land bank shortages with builders and developers. Given the limited availability of development land and the site specific planning agreements average prices per hectare are becoming less and less useful as indicators of the trends in the prevailing market in defined locations.

Within Manchester City Centre, the planning preference for mixed-use including residential is modified in the 'Knowledge Capital Bid Area' which encompasses the universities and corridors of land towards the City Centre, where planning applications will be assessed on the basis of whether knowledge-based industries would provide a viable alternative use.

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.