According to Knight Frank, UK residential development land values rose for the third consecutive quarter in Q4 2009, with urban land values rising by +2.1% and Greenfield land up +4%.

Urban land values are still -51% down on their peak level which was reached in Q4 2007 but have risen +6.1% since their low point of Q1 2009, whilst Greenfield land is -39% below its peak but up by +8% from the low in Q1.

Liam Bailey, Knight Frank’s head of residential research, said: “The strong price performance delivered by development land in Q4 reflects the recovery we saw in the wider residential market during 2009. With UK house prices, development economics have improved and developers and house-builders have been looking to raise new-build starts.

“Starts rose over 2009 and by Q4 were running at 25% above the level achieved in the same period a year earlier. However, while the development sector has become more active, the supply of land in the market is still painfully thin.

“We estimate that demand for land rose by +20% in Q4 compared to Q3 - a significant amount of this new demand is from the house-builders who are back in the market.

The revival in the market has been shown the way by the London market, in particular the ‘super-prime’ areas such as Kensington & Chelsea and Westminster, where land values have gone up by +7% in Q4 2009.