Housebuilders: value of landbanks dives by a third

The size of the losses in the value of housebuilders’ forward landbanks are worse than many had feared according to Knight Frank’s first annual development land index.

Nationally, the value of residential land has fallen by:

• 33% over the past 12 months
• 15% in the past quarter

The Financial Times reports today that a further 10% fall in the value of existing landbanks is still to come.

“The losses in land values around the country are worse than many feared,” says the FT. “However, there are signs that so-called vulture investors are entering the market to snap up bargains among the numerous forced sales of distressed builders.”

Speculators account for 20% of buying activity nationally and half in London.

Agents suggest that the resale value of the Olympic park in Stratford could fall short of the government’s estimate, a prospect that does nothing to enhance the credibility of the funding equation that sits behind the five-ringed 2012 jamboree.

Yorkshire and Humberside have suffered the most over the past year, with landbank prices falling by 50%.

At the other extreme, inner London has been least affected with only a 10% fall in development land prices.

Knight Frank reports that while demand has dropped by half in London, it still runs ahead of supply and some sites are capable of fetching £100m per acre.