New development levy knocks price of land

Thursday 9th August 2012

The price of building land has fallen back amid concerns over a new tax on development, the Community Infrastructure Levy.

The fall in value of UK development land, between April and May, is only marginal, according to property agents Knight Frank, but comes after no change in the first quarter of the year and after a 1.3% rise in values last year.

There is no movement in price in London, say the agents. However, this is in marked contrast to the jump in values of 20.3% last year.

Knight Frank says the finite supply of development land, caused partly by the backlogs and uncertainty in the planning system, is to some extent holding land prices up.

But it also says that the new Community Infrastructure Levy (CIL) could change this.

The CIL is an optional levy which has yet to be decided by many councils, creating uncertainty over whether there might be a charge, and what the charge might be.

The highest charge so far for new homes is £575 per square metre, to be charged on developers by Wandsworth Council in London – where the Nine Elms development is taking place. See next story.

Whilst the Wandsworth charge is exceptional, developers have already unsuccessfully challenged Bristol City Council’s attempt to bring in a much lower charge, which they said would make building unviable (as reported by New Homes Today on July 19).

Some councils which have published their proposals seem to want to use the levy to bring in an extra £100 per square metre in revenue, but Southwark in London is looking at £400 and Islington at £450.

Costs would inevitably have to be passed on to home buyers. The question for developers is, would they pay the price?