According to Knight Frank’s Q3 Land Index report, the value of development land has slightly risen for the second successive quarter, with an increase of +1.1% (urban land) and +1.6% (Greenfield) for the quarter to September.

Knight Frank believes the recent growth has been led by re-financed house-builders and private equity groups.

However, despite the recent growth, land values around urban areas are still below their Q4 2007 peak by -50% and on an annual basis urban land is down by -26.4% and Greenfield by -16.8%.

According to the report, there is a stand-off between land-owners – who expect values to rise still further over the next 12 months – as builders try to acquire land and to re-build stocks, and purchasers who are finding development financing still in short supply.

Therefore, as the current available stock of properties is getting rather thin on the ground, house builders and agents are becoming concerned that they will have nothing to sell when the market further improves in spring next year.

Liam Bailey, head of residential research at Knight Frank, said: “The reaction has been for many builders to raise money, to allow them to buy new land and start building. The volume of new-build starts has certainly improved since the turn of the year but there is evidence that this is the result of less complex sites being build out.”