Land prices collapse but debt-laden builders can't bu...

26 June 2009

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Written by rosalind renshaw

Land prices have collapsed but cash-strapped developers are unable to take advantage of lower values, Savills has reported.

It says that prices have fallen by 57.8% from their peak in September 2004.

Declines are steepest in northern towns and cities, where land prices are down by 65.8%, and have dropped least for greenfield land in the west country; even so, they are down there by just over half.

Savills says the inability of developers to buy land will be a severe drag on market recovery.

Yolande Barnes, head of research, said: “The whole housebuilding model will have to change in the absence of debt finance. In the early nineties it was just a question of buying land and waiting for prices to rise. Now, new forms of finance will have to emerge, which could be private equity and venture capital money.”

Savills forecasts that values of small plots of land with planning permission will recover faster than larger sites.

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