Slowing home sales are hitting land values in Greater Manchester.
The effects of international economic turbulence on the housing market and, by extension, the residential building land market in Greater Manchester since early August 2007 and throughout 2008, have been marked.
As elsewhere in the country, agents in Greater Manchester are reporting significant falls in value and sales volumes with a high percentage of sales collapsing at contract stage as mortgage lenders refuse loans.
There is clear evidence that the stagnation of the housing market has now filtered through into residential land values and there are implications for developers.
Immediate responses have varied. Several housebuilders have mothballed partially completed developments while they wait for lending institutions to relax their current policies.
This has hit inner city and suburban localities in particular and has also had a marked effect on the previously booming sector of high-rise city centre flats and apartments.
Construction work on the Sarah Tower, a mixed-use development of more than 20 storeys in the Piccadilly area, has stopped and City Lofts has placed 250 flats into receivership in several cities, including Manchester.
It is not all gloom and doom, however. In anticipation of an upturn in demand, building is continuing on Ballymore’s Piccadilly Tower development, a primarily residential scheme that will become the tallest building in Manchester when completed.
The government has also announced its intention to create local housing companies in several parts of the country, including Manchester, to buy unsold stock from housebuilders for the provision of affordable homes by councils and private developers. This, in addition to other measures announced in the government’s ‘Ensuring a fair housing market for all’ package, should go some way towards restoring confidence in the housing market, and new housing development in particular. And sales of houses and flats are still taking place, albeit with large incentives for brand new developments.
Land values have fallen primarily as a consequence of the effects of falling sales prices and volumes (see map). But other factors affecting land values have been the planning moratorium on new residential developments in parts of Greater Manchester, together with emerging policies from local authorities in the area for the provision of public infrastructure improvements and affordable housing as part of development applications.
Little to show
While interest continues to be shown by developers, particularly for prime sites, there have been very few completed transactions in Greater Manchester.
A tender sale of bulk residential land in the Bolton area during May this year attracted interest from several of the leading players, but the highest bid was 15%-20% below the level of value that might have been expected in late summer 2007 and there is evidence of the market falling further.
In the city itself the Valuation Office Agency’s Property Market Report, due to be published in October, shows residential land values for larger sites falling by around 15% during the first half of 2008.
All the indications are that land values will continue to fall, although clear evidence is hard to come by as sites are withdrawn from the market in anticipation of an increase in lending by the mortgage suppliers at some time in the future.
Robert Yardley is senior consultant surveyor at DVS, the commercial arm of the Valuation Office Agency.