The value of residential development land in urban England edged down for the second quarter in a row between January and March, while values in greenfield areas grew by the smallest margin in two years while annual growth continued to slow, according to Knight Frank research.

Prime London land values bucked the trend, with values rising by 2%, the first increase since summer 2010 however demand for well-located, “oven-ready” housing sites remains strong, but sites in poor locations or for developments of houses worth less than around £200,000 are attracting limited attention in the South

Despite continued annual growth, average residential land values are still around 40% lower than their peak at the end of 2007.

Gráinne Gilmore, Head of UK Residential Research at Knight Frank, said: “The easing in growth of residential development land values in the first three months of the year masks a continued demand from developers and house builders for well-located, ‘oven-ready’ sites with planning permission already in place. These sites are achieving in excess of asking price in many cases. Less well-located sites with compromised planning are attracting limited interest and buyers are offering discounted bids to reflect the perception of risk and the poor funding markets. There is also some interest in small flat schemes in strong M25 locations.

“Sites in the South of England, outside London, where finished properties are set to fetch less than £175 per square foot – which equates to a end sale value of around £200,000 for a typical family house, above the national average price of around £165,000 – are attracting little attention from developers, who are keen to target more affluent house-buyers.

“The biggest demand for sites is in London and the South East, marking a further polarisation between the North and South of England. There has also been an increase in land coming onto the market as a result of distressed sales, especially in the South West, easing the lack of supply that has supported prices over the last 12 months.

“In London supply remains a key issue although a number of high profile sites have come to the market over recent weeks, however, with competition for the most desirable sites especially from Far Eastern and Middle Eastern purchasers is expected to push up prices over the next twelve months.” concluded Gilmore.