Competition for development land is at last boosting development land values however a gulf is emerging between small sites in high demand housing markets, particularly in London and the South East, according to new research from Savills.

By contrast, the longer-term promotion and preparation costs associated with larger sites continues to take its toll on value growth and many sites remain mothballed and unsaleable.

Across the country Savills say that some developers have recapitalised their finances and are now actively seeking land, creating competition again for small ‘easy’ sites in areas with an identifiable housing need or shortage. The rarity factor of such sites in prime locations is really driving up prices, in some cases now within 20% of peak 2007 levels.

The average value of residential development land showed growth, albeit modest, over the past three months. Greenfield land values rose by an average of 3.2% and urban land values by 3.8%, taking annual growth rates to 16.6% and 14.1% respectively.

Yolande Barnes, head of residential research at Savills said: “But average growth figures disguise huge variations, and need to be treated with some caution.

“The development land market is now polarised on virtually every level: between North and South; high and low value housing markets; large, infrastructure-hungry sites and small easy to develop derisked sites.”

The value of small to medium sized consented residential development land in London has risen by 21% over the past six months, with fierce competition being seen for the best sites.

By contrast, Savills report that urban, brownfield values in the North continue to slide, down -2.2% in Q2 and at the extremes values are down by -71% from their peak in the extreme North of England.