Land values in prime central London dropped by 10.3% in the year through to September, and are now at around the same levels as June 2014, as higher taxes, the Brexit vote and an oversupply of luxury homes cause prices at the top end of the market to decline.

Banks are less willing to lend for site acquisitions and construction, contributing significantly to the decline in values, according to a new Knight Frank report.

The broker said that housebuilders are also paying less for land because they want to raise their profit margins as a buffer against any further falls in residential property prices in the heart of the capital, despite a new report revealing that profitability at the UK’s largest housebuilders has increased at more than twice the rate of new housing output in recent years. 

Justin Gaze, joint head of residential development at Knight Frank, commented: “With the current level of political uncertainty, increased risk has been placed on housebuilders, causing them to look for greater margins before committing to land acquisition. Across the market, developers continue to be selective, looking at sites which offer value, projected growth and sustained demand from end purchasers.”

Gaze reports that there is still a “weight of money looking for opportunity”, as reflected by a good levels of land transactions over the summer months, especially outside of central London.

He added: “There continues to be a positive market sentiment, with the right product sensibly priced performing well. Outside of central London, zone three and beyond, demand for new homes is strong, supported by the government’s Help to Buy initiative.”