The value of residential land rose more than twice as much as home prices in London’s best neighborhoods during the 12 months through June as demand for development sites outstripped supply.
Land values in the 13 neighborhoods that Knight Frank LLP defines as prime central London jumped almost 19 percent during the period, the broker said in a report today. Home values rose 8.1 percent, Knight Frank said on July 8.
London’s development land market outpaced the rest of the country as developers in the U.K. capital competed for sites in the city, the best-performing part of the housing market in the past five years. The value of previously undeveloped land in England and Wales increased by an average of 5.6 percent in the 12 months through June.
“The increase in land values mirrors the growth seen in house prices over the last year,” Knight Frank said in the report. “The pace of growth in land prices is also regionalized, just like house prices.”
The recovery in London’s housing market, which started in the city’s prime neighborhoods, has spread to the rest of the country as the U.K.’s economic recovery boosts land values. The prices of apartments and houses in London as a whole jumped 26 percent in the second quarter from a year earlier, the biggest gain in 27 years, Nationwide Building Society said July 2.
Land values may rise at a slower pace after an increase in construction costs, including labor, during the past year, according to today’s Knight Frank report.