According to the latest research from the property adviser, Savills, the competition for developable land has begun to impact positively in development values, affecting housing and mortgage markets alike. There appears still to be, however, a gap between small sites in housing markets that are in high demand. Conversely, the higher costs that come with larger sites in terms of both preparation and promotional aspects is continuing to impact negatively in value growth, with many sites still being curtailed and others remaining impossible to sell, the research shows.

Some developers across the country have re-captitalised, and are creating competition for small, so-called ‘easy sites’ by seeking land in areas with definite housing shortages. Prices have been pushed up by the rarity aspect of sites in prime locations, with prices in certain areas currently within 20% of their levels at 2007’s peak, according to the research.

Modest growth has been seen in the average value of residential development land during the past three months. The values of greenfield sites climbed by an average of 3.2%, with urban land values climbing by 3.8%. The rises saw annual growth stand at 16.6% and 14.1% respectively.

‘Average growth figures disguise huge variations and need to be treated with some caution. The development land market is now polarised on virtually every level: between North and South; high and low value housing markets; large, infrastructure-hungry sites and small easy to develop de-risked sites,’ according to Yolande Barnes, the head of Savills residential research. This is especially true for many places that were once considered risky due to high levels of bad credit mortgages or others with less desirable fixed mortgage rates.

‘More than ever, those in the market need to evaluate sites on a case by case basis, since the value of each site and, ultimately, its ability to generate revenue, will be determined by regional and, in many cases, highly localised factors,’ Ms Barnes added.

According to the research, the divide between the north and the south has become more marked, and more definite. The value of greenfield sites in the south-east are growing at the fastest rate, and currently stand only 37% below their peak levels of 2007. This has largely been as a result of the strong demand for ready-to-build greenfield sites. Ms Barnes commented that the figures reflect the burgeoning confidence of developers based on the residential market’s in-built strength as well as a definite shortage of available land. Conversely, the value of urban, brownfield sites in the north of the country has continued their decline, falling -2.2% for the quarter, and now 71% below peak levels. ‘Such sites require promotional capital beyond the means of a fundamentally cautious and under capitalised market. Urban land values, particularly the larger sites, therefore continue to languish,’  according to Ms Barnes.