The behaviour of the banks is key to the outlook for the state of the market. Thus far, they have given companies a significant amount of leeway, but with a large amount of funding schedules to be refinanced imminently, and a proportion of that in negative equity or requiring a high loan-to-value ratio, a rise in default seems certain, further damaging banks' balance sheets and impairing their ability to lend. The most significant risks are all on the downside and with the fundamentals remaining unsupportive, land purchase opportunities will be plentiful, as banks remove assets from their balance sheets. The Silkpoint Strategic Land Fund will capitalize on this availability.

Regional Picture

A distinct North/South split in the land market has begun to appear. Until September 09, values were falling across all regions at relatively even rates. The third quarter was the first where values stabilised or saw small rises. The exception, however, was the North, where values continue to slide, down -11.8% (in the case of urban land). Values are now -70% lower than their peak in this region, compared to the South East, which has seen a fall of -51% from peak values (see chart below). There is also a recognition that land with planning permission is a finite resource.

Strategic Sites

Strategic sites are critical in the delivery of new homes in regional markets. Strategic sites represent 23% of the national 20 year Regional Spatial Strategy planning targets. With the sharp decline in development activity over the last 18 months, it has been these large sites, requiring the largest levels of remediation and investment, that have stalled. The prospects for many strategic sites remain poor.

Ownership of Sites

The public sector (including housing associations) remain the largest owner of sites , controlling 27% of the land (226 sites), with commercial developers / property companies following at 24% (204 schemes). In terms of delivery, the public sector accounts for some 26% of residential units under construction (78,000 units).

This means the public sector is responsible for the delivery of more units than any other. It also reflects their ability to drive forward projects when the private sector is otherwise stalled by wider market conditions. In a market where private sector delivery has been impaired by adverse credit and economic conditions, the public sector has clearly had the advantage. It is however less certain whether this can continue beyond 2010 as likely public sector cuts start to bite.

The resilience of the public sector during the downturn is further reflected in the ownership of those schemes that have officially been announced as ‘on hold’, (see below).

Housebuilders control 17% of units under construction on strategic sites, but have minimal involvement prior to the grant of full planning permission (see above). This reflects the large scale financial and organisation backing required to drive forward strategic sites, rather than the short term funding and trader model typically adopted by housebuilders. Consequently, housebuilders are more frequently brought on board at the delivery stage, or play a more limited role within a larger partnership.