Land Value

The Value Of Land Development On Brownfield Sites

Uk land value forecast continue to show healthy increases in land prices, with the expectation of this trend continuing over the medium term.

However, there are two major factors that will have significant impact on the value of land and land prices over the medium to long term. Namely, the severe housing shortage and the level and supply of building development land nationally.

Of particular note, a Halifax Survey revealed that the number of building land sites acquired for residential development had declined since 1997, following developers' moving away from the traditional building development land to that of mainly redeveloping brownfield sites.

Most brownfield land developments have mainly been in inner city areas on modest sized sites but with the potential for a far greater number of units. These units - mostly flats, have commanded very high prices in relation to the value of the land are often perceived to be way over and above their real value.

However, there are two additional financial constraints which impact on the value of land, faced by land property developers today. Firstly, brownfield sites will nearly always involve costly remediation; that is, the cost of cleaning up a site such as a dis-used petrol station before building can begin.

Secondly, there is the requirement that the developer provide a percentage of development units as 'affordable housing' at approximately a third less than the selling price. These requirements not only erode profit margins but impact on the the price of land.

In a nutshell, if we take a relatively small site that could accommodate a high density development of flats; with planning, the land price is effectively increased. However, the number of affordable units and any necessary remediation costs will impact on the profitability of the overall development.

There have and continue to be great uncertainties in the land property market in relation to the need for more affordable housing and the level of supply for new development sites. Needless to say these uncertainties and how they are eventually resolved at a national level will have an impact on land prices.

Since not all land are equal, there can be huge variations in perceived land values even within the same location rather than just across regions. Apart from land location, topography and desirability, there are other important factors all of which will have a bearing when assessing uk land prices and the value of land in the years ahead. These include: