Lack of Funding Hits UK Residential Developments

A lack of funding for residential development in England is causing price increases to slow rapidly, it has been suggested. According to Knight Frank, urban land values fell by one per cent and in Greater London the fall was higher at 2....

A lack of funding for residential development in England is causing price increases to slow rapidly, it has been suggested. According to Knight Frank, urban land values fell by one per cent and in Greater London the fall was higher at 2.5 per cent, during the final quarter of 2010.

The only urban market which avoided price falls was the prime London market, which registered no change over the quarter, the property consultant said.

Liam Bailey, Knight Frank’s head of residential research: said: "Funding problems continue to provide major difficulties for developers. In most cases there is no funding available for sites without planning consent and even for land with a consent, loan-to-values of 50 per cent and possibly 60 per cent are the maximum provided."

He added that land values are likely to fall back in 2011, but land transactions are expected to rise.

However, Knight Frank warned that there was a risk that as the level of stock on the market increases as a result of banks restructuring, supply will begin to rise just as demand is falling back.

- Monday 07 February 2011

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