Development land prices rose across England and Wales between April and June 2013, according to the latest Residential Development Land Index by Knight Frank.
The report highlighted that average prices had increased by 1.2 per cent across the country, this being driven by a four per cent rise in prices in central London. In the latter region particularly, prices have been rising dramatically over the past 12 months, as competition for prime sites has been getting intense; so much so that land values rose annually by a mammoth nine per cent in central London. In total, land values rose across England and Wales by 1.8 per cent in the past year.
As London continues to outperform the rest of the country, the undersupply of land in the capital city and major regeneration projects in the pipeline, such as the Crossrail, are only set to make the market even more polarised over the next five years.
Gráinne Gilmore, head of UK residential research at Knight Frank, said: "Certainly the underpinning of demand in the market will give house builders the opportunity to achieve faster sales turnover, cutting their cost of capital and leaving room for land prices to grow. There is also anecdotal evidence that construction activity is starting to rise. This will be welcomed by home buyers and policymakers alike."
Ms Gilmore added that the recently launched Help-to-Buy scheme is already showing how the policy can help to encourage development, even though it has only been implemented for four months. This recent rise in construction was also noted in Markit's July Construction report.
There generally seems to be improved sentiment within the market, as more and more potential investors have been looking towards raw development land and seeing the financial benefits that the sector can offer.