If You Want to See a London Property Crash, Look at Land Values

(Bloomberg) -- London development land prices are plunging, even as home prices remain near record highs.

The value of Capital & Counties Properties Plc’s stake in land in the Earls Court district has fallen more than 50% from its peak in 2015. The decline suggests that rumors of a rebound in London’s prime market have been overstated, at least when it comes to apartments. The company is weighing the sale of the land, which has planning permission for about 7,500 homes, but so far the bids have all come in below book value.

The value of CapCo’s land dropped because independent assessors said the final value of the project would be lower than previously thought, the cost of delivering the units would be higher and the developer’s margin would have to increase to help protect against further price declines.

And there’s little sign the plunge in land values is tailing off: the implied value of the land was 412 million pounds ($515 million) as recently as March, compared with 389 million pounds at the end of June, according to a company statement on Thursday. The crash is making the land attractive for uses other than luxury apartments, with housing for the elderly and multifamily blocks among the projects now being considered, CapCo said.

--With assistance from Jack Sidders.

To contact the reporter on this story: Neil Callanan in London at ncallanan@bloomberg.net

To contact the editors responsible for this story: David Merritt at dmerritt1@bloomberg.net, Patrick Henry, Keith Campbell

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