Opinion

Greenfield Land Sites in Key Locations Generating Investor Interest

Investors are now setting their sights on greenfield land in key locations across the country. According to Savills, in 2012 urban value growth increased by just 1.7 per cent, compared to greenfield land, which saw a rise of 3.6 per cent. Both of these outperformed national house price growth, which fell by 1.1 per cent.

This is a reflection of current market conditions, with suitable, permissioned land in short supply, despite the National Policy Framework taking steps to increase consents. What's more, demand has simultaneously picked up pace, with house builders and developers working through their inventory of sites bought prior to the downturn.

Savills claim the market trend towards greenfield land is most pronounced in the West Midlands and south Wales. Local planning systems have slowed the permissioning of land, pushing up values for the limited amount of stock. In the last six months of 2012 alone, the Savills Western region Greenfield Index recorded growth of 3.1 per cent.

While the south is still outperforming the north when it comes to land value recovery in a broad sense, there is change occurring regionally. Housebuilders are now targeting their activity, so demand is strong for consented land in high-value regional towns and cities. This means that areas outside of the South East are seeing themselves on top ten lists of best performing locations.

However, those considering greenfield property need to be aware that it is somewhat of a cash market. "Recapitalised house builders, reporting steadily increasing profits and reduced debt, are increasingly using their balance sheets to fund land purchases," Savills wrote in their report. "This has become particularly important in stronger housing markets with limited stocks of permissioned land, where competition is greatest. In these markets, cash buyers have the edge to seal the deal. In central London, nearly all transactions are taking place on this basis."

"Build now, pay later" land models are still necessary, however, with funding and issues of risk preventing many from bringing forward large, complex and marginal sites.

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