A lack of activity in the North’s land market has compounded the rapid loss in values that took place between 2008 and the end of 2009 with land prices down 30% in the last two years.
The lack of funding coupled with weak demand from both the residential and commercial sectors has resulted in a further drop in values of approximately 30% from early 2010 to the end of 2011, according to Savills Ireland.
Values in 2012 are estimated to be back to those last transacted in the early 2000s; demand is expected to remain weak and will focus on areas with strong demographics, it said.
Sales activity in the residential/commercial land market has come to a virtual standstill with any ongoing development being led by occupier demand with little speculative development.
Key speculative developments have been shelved in the last four years.
There are no speculative investors/occupational tenants ready to commit and therefore developers have ceased construction to avoid further funding drawdown and the liability for statutory payments such as building control and vacant rates.
This is likely to remain the case until there are sufficient purchasers/ occupiers capable of committing to reasonable prices/lease terms, which justify the cost of taking on building projects. This lack of activity has compounded the downward pressure on residential and commercial land values across all sectors and any evidence of land sales in the last twelve months have been driven by opportunistic purchasers or experienced developers with clear end user tenants/occupiers or for owner occupation.
“A recovery in the land market will be led by a return to economic growth, a recapitalised banking sector and an increase in the availability of funding,” Joan Henry, Director of Research, Savills Ireland said.