In the six months to March 2016, central London residential development land values fell by 1.5%, leaving values 30% above their 2007/08 peak, whilst land buying activity is increasing in the outer boroughs. Land value for office development in central London has been catching up with that of residential, but growth slowed to a 0.6% increase in the half year to March 2016 due in part to the recent Stamp Duty changes for commercial land and property.

The upcoming EU referendum and the prospect of having a new Mayor will add some uncertainty over the next six months, but with the number of new homes completed in London continuing to fall significantly behind targets, the need for more homes in the city remains. Savills estimates that there is an annual shortfall of housing of 27,500 with the greatest need for homes priced below £450psf. Building in the outer boroughs is more likely to service demand in the price bands with the greatest shortfall.

Urban and greenfield development land values increased at similar rates in the first three months of 2016. Urban development land values grew by 1.0% in Q1 2016 and greenfield values rose by 1.0%, delivering annual growth of 7.5% and 2.6% respectively. Over the next five years it is expected that the average value of greenfield development land in the UK will increase at rates just above that of house prices. This assumes that the same market conditions prevail and greenfield land values retain the same relationship with house prices as they have done over the past five years.

On a regional basis, using this same assumption, greenfield development land values in the South East will outperform house prices more significantly in the next five years. Greenfield land values increased by 39% in the last five years compared to 29% for house prices. This, in general, is a high demand market with higher house prices and more constrained supply than other parts of the country. By contrast, other markets are expected to see land values increase more slowly than house prices over the next five years. However, the more competitive markets where there has been stronger land value growth than house price growth (such as Edinburgh, Solihull and York) are likely to buck their regional trends.

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