COMPETITION to snap up land for development in the urban parts of Dorset and Hampshire has seen values soar in the past year.

Major housebuilders are the most competitive buyers with surplus money to spend, research by real estate business Savills has found.

It found that in Dorset and Hampshire, the value of urban land grew by 2.2 per cent in the first three months of this year and 7.3 per cent on the year before.

Nationally, values grew by 1.3 per cent in the quarter and 7.2 per cent annually.

Greenfield land rose one per cent in the first quarter and eight per cent annually – below the national figures of 1.4 per cent quarterly and 9.3 per cent year-on-year.

Colin Wilkins, director and head of the south coast development team at Savills, said: “Demand for land throughout Hampshire and Dorset remains exceptionally strong with competition for sites from a diverse range of players.

“There is limited acceptance for deferred payments on a lot of transactions that we are involved with as parties look to become more competitive through payment terms in addition to tightening margins.”

Savills said the combination of high demand and constrained supply had kept values high as potential buyers were willing to compete in order to have land in their development pipelines.

Although inflation in building costs was putting downward pressure on values, its impact was offset by house price growth and the imbalance of supply and demand.

Major housebuilders had spending power whereas smaller and medium-sized players were more constrained by cost inflation, Savills said.

High demand was also being intensified by competition from alternative uses, which Savills said was a new dynamic in the residential land market.

Mr Wilkins said: “Demand from industrial and logistics developers is competing in more areas across the country, putting even more pressure on constrained residential land supply.

“Strong prices are being paid for industrial land for well-connected sites to major road network access and motorway junctions.

“Although the current land market remains buoyant, capacity for further growth is limited. Over the next five years we anticipate slowing growth in land values across the region.

“Our research shows greenfield land value is forecast to grow by just 4.4 per cent over the next five years after rising by almost 10 per cent in the last year alone.”