Residential land development prices in the UK fell in the third quarter of 2018 with a new analysis suggesting that Brexit is having an effect on the amount some developers are prepared to pay.

Average greenfield development land prices fell by 2.1%, taking the annual growth to 2.6% while urban brownfield development land prices fell 2.3%, taking the annual growth to 3.3%.

The data from the Knight Frank residential development land index also shows that prime central London development land prices fell by 1.2%, taking the annual decline to 4.3%.

Developers are also wait for more clarity over the UK’s future relationship with the European Union before making strategic investments in land, the report says.

It also points out that over the past 12 months, the greenfield land market has been characterised by competitive bidding, particularly for smaller, ‘oven ready’ sites in locations where there is clear demand, or where regeneration or transport upgrades are scheduled.

‘However, due to the increased economic uncertainty surrounding Britain’s EU departure, which comes at a time of moderating house price growth and increasing build costs, house builders are becoming increasingly risk conscious,’ said Patrick Gower, UK residential research associate at Knight Frank.

‘They are responding to the increased development risk by allowing larger margins, which in turn are squeezing land values,’ he added.

The breakdown of sites within the Knight Frank index shows values in cities outside of London remained largely flat, while the value of some, higher density sites in London declined as Government measures aimed at cooling demand from buy to let investors continues to be factored in.

‘The majority of central London developers are choosing to wait for greater economic certainty before purchasing land, however there have been notable exceptions in which investors have opted to buy while land values remain 17% below the 2015 peak, and sterling continues to trade at a discount relative to its value before the 2016 referendum,’ Gower explained.

‘Sentiment across the U.K. land market is likely to remain subdued until the economic implications of Brexit become clearer, at which point pent up demand may be released, underpinning land values over future quarters,’ he concluded.