However gap between land values in the North and South continues to grow

The disparity between land values in London and the North is growing according to the latest land index results from development consultancy Knight Frank.

Land values in the North continue to be constrained by the decline in mortgage availability – however there has been a surge in land values in and around London.

The Q2 2011 results show that prime London residential development land values continued to grow although at a slower pace. Prices rose by 0.4% between April and June.

However land values in Greater London rose more strongly – climbing by 2.3% on the quarter. Government initiatives to help first-time buyers are thought to be the main factors behind the growth.

For residential land on greenfield sites in England the pace of annual growth slowed to 4% in Q2. The value of brownfield land in urban England also fell – by 0.6% in the quarter.

Average English residential land values are now around 40% lower than their peak in 2007.

Gráinne Gilmore, head of UK residential research at Knight Frank, said:

“Demand for prime land in London continues to outstrip supply, boosting land values and bucking the trend seen in the wider English land market.

“This is expected to continue as developers search out the most lucrative sites.

“The market in Greater London - which includes all non-prime London boroughs - is picking up, benefitting from the recently-announced government initiatives to help first-time buyers, which is making more schemes viable in areas surrounding the city centre.

“Land values, especially outside the M25, are intrinsically linked to the availability of mortgages and the speed at which housebuilders can sell their properties.

“The continued constraints in the mortgage market are proving a major influence on the current performance of land values.”