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News: Building land value falls by 20 per cent

Mon, 18 Aug 08

The value of residential building land, one of the key assets for most housebuilders, plummeted by as much as 20 per cent in the first six months of this year as the sector continues to suffer from the current climate of the credit crunch.

A study by real estate agents Savills shows that the value of Brownfield sites are down 19.8%, and Greenfield sites are down 22.5%. These types of land fell by roughly four times the rate of the housing market as investors neglected the industry. Experts are concerned that the figures could go as high as 50 per cent before the existing slump is over.

With development land an intrinsic part of most housebuilders' asset foundations, the valuations will be a major concern for an already struggling sector.

Savills' director of research, Yolande Barnes, said: 'There are two ways that falling land values affect housebuilders. The first is in pushing down share prices, but the more worrying issue is for those that are heavily indebted and are under pressure from their banks to repay debt. At the moment you have to sell development land at fire-sale prices.'

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