A mismatch between between housing supply and demand is behind the record high cost of residential development land, a leading estate agent has claimed
The average residential land price jumped 11.5 per cent during the year to the end of March - the strongest rate of growth since the first three months of 2005, figures compiled by Frank Knight revealed.
The group blamed the leap on a combination of increasing market confidence, a desire for more properties and a lack of development sites.
It said there were 15 per cent more purchase applications during the first quarter of the year than during the final three months of 2009. The amount of available land grew by just 8 per cent in the same period.
Liam Bailey, head of residential research at Knight Frank, said: ‘House price growth has certainly helped, but it is the supply and demand dynamics in the land market which is really pushing prices higher across the country and especially in the south of England.’
Growth in the cost of greenfield land was particularly pronounced, rising by an average rate of 6.8 per cent. Urban land values climbed by 2.4 per cent.
Driving the market, residential developers counted for 44 per cent of all buyers during the period, with housing associations second at 14 per cent, closely followed by speculators at 13 per cent.
Private land owners were the main sellers at 23 per cent, with the public sector and speculators in joint second with 19 per cent.
But the company warned that a good proportion of the current land supply was ‘tarnished’, either through over exposure or over pricing, and it warned that the lack of quality opportunities was still acting as a drag on market activity.