Housing land values have showed small signs of growth in the first part of 2019, with the Midlands and Scotland continuing to outperform London and wider South East according to real estate advisor Savills.
UK greenfield and urban land both saw small increases in land value in the first quarter of 2019, both grew by 0.2%, bringing annual growth to 1.3% and 1.8% respectively.
However, the land market remains relatively robust in much of the country. The number of sites sold in the Midlands, North, Scotland and South Wales is in line with – or above – 2018 levels, according to the latest analysis from the Savills residential development land index.
Certain regions also outperformed the national average in terms of growth, with values in the West seeing increases of 0.6% and Scotland values increasing by 0.5% in the first quarter of this year.
The most sought after sites are oven-ready, smaller city centre sites and straightforward medium sites (c100-150 units) on the edge of urban centres. In London, where there have been fewer transactions, consented sites in more affordable, Outer London boroughs, with good connectivity remain in demand.
Ben Glover, development director at Savills Nottingham, said: “Despite the background of economic uncertainty, it is good to see the development land market remaining relatively robust outside of the south east. This stability should be encouraging for landowners looking to bring their land forward for development. This wider market strength, coupled with on-going housing need, provides a clear demonstration that there is a continuing opportunity for landowners.”
Housebuilders take steps to mitigate risk
Underlying market uncertainty, slowing sales rates and the Government’s plan to end the Help to Buy scheme after March 2023 means there is less appetite for risk, particularly in London where values remain suppressed. As well as being selective about the sites they buy, housebuilders are increasingly making use of their established pipeline – on average the listed housebuilders have 4.5 years’ worth of immediate land and are sourcing almost a third of that land from their strategic pipelines.
To mitigate risk, housebuilders are being selective about the sites they buy and are making use of their established land pipeline. They have built up these pipelines since recovering from the global financial crisis enabling them to increase the number of homes they build each year.
“We are seeing clear evidence that there is risk management among housebuilders. They are being selective about the sites they are buying and using their own longer term land pipelines alongside purchasing immediate sites,” according to Dr Lucy Greenwood, Savills research analyst.
Some housebuilders are also re-planning sites to include an increased amounts of smaller units, anticipating the changes to the Help to Buy scheme from 2021 with new caps and for first time buyers only, which will run until March 2023.
Land led development for Housing Associations
Housing associations (HAs) continue to be active in the development land market and are bidding competitively for sites in London and across the UK, the report finds. Greater clarity around grant funding and the strategic partnerships programme have given HAs confidence for the long term against the a wider market backdrop of uncertainty. Dr Lucy Greenwood, Savills research analyst, says: “The £3 billion of funding for the Affordable Homes Guarantee Scheme and the strategic partnership grant programme have provided the sector with some clarity over the longer term and means they are less reliant on cross subsidy, enabling them to deliver more social rented homes.” According to the NHF quarterly Supply Survey for Q4, 2018 social rent starts were up by almost half (48%) compared to the same quarter last year.