The value of development land across the UK fell by an average of 50% during the course of 2008, according to the latest figures from the Knight Frank Residential Development Land index.

The latest index figures show that urban and greenfield land values dropped by an average of 17% and 14% respectively outside the capital during the final three months of 2008.

Jon Neale, head of development research at Knight Frank, said: "This unprecedented fall in land values - experienced right across the UK - is a reflection of the ongoing problems with securing finance for development and the continuing crisis in the housebuilding sector.

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"Very few developers have cash or can access bank finance, and those that are in a position to buy are adopting an extremely cautious strategy. Only extremely well-located sites, or those suited for larger family homes, are attracting interest - or, indeed, qualify for bank backing. Demand has dropped by between a third and a half, depending on location."

The index also measures the market share taken up by various vendor and buyer groups. Housebuilders and other residential developers represent, at 27% of the market, the largest slice of those selling land. Meanwhile, speculative land investors are the single biggest buyer group, at 24% - followed by the housing associations and private landowners.

Neale added: "It is clear that the conditions are being created for a large-scale transfer of development land, from housebuilders to private investors and landowners as well as the public sector, in the form of Housing Associations backed by funds provided by the Homes and Communities Agency."

Neale said there is little sign of any mass movement. However, many players believe fair value is approaching and prices have a further 10% to fall before stabilising over the Summer.

(GK/JM)