The value of building land in the greater Dublin area has fallen by at least 20 per cent, mainly because of the Government's plan to take one-fifth of all sites for social and affordable housing. The drop in value has been exemplified by the sale of 47 acres in the west Dublin village of Saggart for around £15 million. It had been expected to make over £20 million.

According to agents specialising in the land development market, this case confirms a growing trend in recent months which has seen values fall by between 20 and 30 per cent. A number of sites on the market at the moment are attracting less interest than anticipated and are not expected to make the kind of prices they would have fetched earlier this year.

The Co Wexford-based housebuilder William Neville is understood to have agreed to pay about £15 million for the Saggart land, which was owned by the Clondalkin Group. It is likely to accommodate about 700 starter homes. The disappointing sale price is all the more surprising because Saggart has been designated a Strategic Development Zone in the area action plan prepared by South Dublin County Council. This will allow development to proceed without reference to An Bord Pleanala, provided the scheme is in line with the area action plan.

Interest in housebuilding land in the outer suburbs has waned since the Government announced its intention to compel developers to sell on 20 per cent of sites at agricultural prices. There is now considerably less competition for sites than in recent years. Agents say that few of the big builders are still pitching for land because they have all assembled enough land for the next few years. In some cases banks are insisting that existing land be developed before they are prepared to fund further sites, which can only be developed in the medium to long term.

However, the number of sites coming on the market continues to increase because of fears that values will continue to slip as interest rates increase. Vendors with land designated for housing are also concerned about reports that the Government could increase capital gains tax from 20 to 60 per cent.

Agents say that south Dublin sites with full planning permission are still doing well because of the continuing strong demand for new homes.