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A recent study by leading property consultancy Savills suggests current oversupply in housing could lead to a deterioration in land values.
The study highlights that given the oversupply of flat developments some urban centres are experiencing, developers are unlikely to add more stock. Housing output and density are therefore likely to fall over the next year according to this research.
This in turn will threaten urban land values leading to a drop of up to 15 per cent within some city centres, the study predicts.
Yolande Barnes, Head of Savills Research, said "Our findings reveal that whilst land values in prime areas where the supply of new build is constrained are likely to hold or even rise through 2006, it is those urban areas suffering from the over supply of flatted developments which are cause for concern."
She said a weakened residential market, particularly for new build, is partly to blame for this, with the worst hit areas being the South East and Wales.
On the flip side, the research predicted that greenfield values, which increased 1.2 per cent in the nine months to September, would continue to grow.
Barnes added that the housing market may receive a boost from a rush to beat the impending Planning Gain Supplement due to come into effect in 2008.
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