(Bloomberg) --
Residential land values in London's priciest areas are dropping, with developers taking a more cautious approach to new projects during the coronavirus pandemic.
The average price of land for development in prime central London fell by 6% in the second quarter, the first decline in more than a year, according to a report by broker Knight Frank. That means plots are now back to 2013 values, the broker's data show.
Land values tend to fall more than house prices in periods of uncertainty. That's because developers bid less for land after pricing in larger profit margins to protect themselves against the possibility of values eroding further. The drop in the three months through June echoes the decline after the Brexit referendum in June 2016, when Knight Frank's residential development land index fell by nearly 7%.
“Some housebuilders and developers are increasing their profit margins to reflect increased uncertainty as the U.K. works on rebuilding its economy in the aftermath of of Covid-19,” according to the report.
The declines in London's best districts mirror the falls seen for greenfield plots and urban sites elsewhere in the U.K., according to the report.
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