With a general election imminent, anything is possible – to politicians, that is.
So far we have been promised 200,000 homes a year by 2020 (Labour), then 300,000 (Liberal Democrats) and finally no target at all (Conservatives, although they pledge 100,000 homes on brownfield land for sale to the under-40s at 20% below market rates).
While those promises have met with scepticism from the development sector, one pledge has been greeted much more favourably. It is the proposal for a London Land Commission to find brownfield and public land in the capital, via the development of what the Treasury promises will be “the country’s most comprehensive database of public sector land”.
This may be only London and it may be an election promise but in the absence of green belt development being allowed, the next big thing for residential development is unlocking publicly owned land. This would allow the incoming government – whatever its colour – to make a quantum leap in house building volumes.
Four years ago the coalition agreed a target to deliver sufficient public land for 100,000 homes between June 2011 and March 2015. Figures gathered by CBRE suggest the objective may have been met: land for 90,000 homes was released up to September 2014 in a process overseen by the Homes and Communities Agency.
However, there is far more that could be done, as the creation of the LLC suggests.
Savills has analysed the government’s Property and Land Asset database, listing a total of 250,000ha of English land held by Whitehall departments and the HCA itself, but not including land held by the NHS and local authorities.
Although much of this land is heavily protected through National Park, green belt or National Heritage status, each region outside London has at least 20,000 ha – with particularly high concentrations in the South West and East Anglia.
Savills says 13,000ha are “most developable” and, applying a typical density, this adds up to plots for 600,000 homes. The Greater London Authority (even before the LCC was announced) has identified developable public land for 100,000 homes within its patch, taking the English total alone to 700,000 – and that is without NHS or council sites.
“The Ministry of Defence, Ministry of Justice and the NHS are all moving towards accepting the release of land for residential development. This will happen on a large scale eventually,” says Mark Birks, director of land and development at GVA. He says the obligation on most public bodies to seek the highest market returns on disposed assets will inevitably release more land for housing – whoever wins on 7 May.
Certainly the identification and release of more publicly owned land would help developers to move away from the messy piecemeal nature of recent land acquisition at a time when volume builders have temporarily lowered their demand for new sites.
“Connectivity and appeal to buyers are crucial but builders are now being highly selective outside London. They’ve acquired a good deal recently and are building out before acquiring much more,” says Justin Gaze, a partner at Knight Frank.
“There’s also a resistance to big developments. The infrastructure costs and additional payments for something like a 2,000-unit scheme are so large that sites for 50 to 100 units in well-established locations are perhaps more in demand,” he says.
That trend should, in theory, play to the SME builders, but Birks argues that they are playing a canny targeting game. Many are looking at high-value sites in local authorities with councils lacking the “minimum requirements” set out in the 2012 National Planning Policy Guidelines.
Those requirements include an identified five-year supply of housing land and a post-NPPF local plan.
Government advice to councils is that without one or both requirements, their policies will be considered out of date and planning consent should be granted to housing proposals “unless adverse impacts… would significantly and demonstrably outweigh the benefits”.
Research by GVA shows 39% of English local authorities lack an identified five-year supply of housing land, while 80% still have no post-NPPF plan in place. That means much current land acquisition within these council boundaries is based on the presumption that either the authority will give consent because of its failure to meet the requirements, or that the builders will go on to win consent on appeal.
Such tactics are hardly the stuff of thought-out and joined-up policies and may contribute to the patchy nature of land pricing and demand across the country. How that will change over the rest of 2015 depends on whether the election produces a confidence-inspiring result in the residential development sector.
Land now around the country
London: “The very high-value areas in the capital are a little quieter than in recent years but the market is very much alive in zones 2 to 4 and beyond,” explains Barry Tansey, chief executive of Mizen, an SME developer. His firm is typical of those volume house builders that have long been active in outer boroughs. There are also institutional investors considering land for PRS schemes in the likes of Enfield and Croydon.
South East: “Obvious land targets for builders are locations with a Waitrose, good commuter connectivity and affluence,” says Simon Hodson of JLL. Reading, Guildford and parts of Kent saw land values rise late last year. “Essex commuter areas and Cambridge have seen strong price growth over the [past] quarter in contrast with the national average,” says Savills’ director of residential research Jim Ward.
Midlands: Recent land deals such as that for 650 units on the old Selly Oak Hospital site and 400 at Shifnal, Shropshire, show demand exists in this region but not necessarily in major centres where “the city-living market is still quite closed up”, says GVA’s Mark Birks. Hesitant progress by potential PRS investors has kept central land markets quiet and CBRE claims there are “only two active developers delivering product” in Birmingham city centre. However, land values have grown in Northampton, Nottingham, Leicester and Derby in the past six months.
South West: National and regional builders dominate suburban and small-town sites across this region with major sites recently acquired on the Bristol and Exeter fringes. Specialist SMEs are looking at Bristol city centre and waterfront sites close to Exeter and Plymouth.
Northern England: Help To Buy has a long-term importance here (“It is a property credit card ultimately influencing where builders build,” says JLL’s head of land Simon Hodson). Savills says Manchester – which two years ago had only local interest – now attracts national builders and development land saw two successive quarters of price growth in H2 2014 after six years of stagnation.
Scotland: The Referendum did little long-term damage. Edinburgh values rose by up to 10% in Q4 while across Scotland greenfield land prices rose 4.8% in the same period, claims Savills. A cloud on the horizon is this spring’s introduction of Land and Building Transaction Tax, Holyrood’s replacement for stamp duty. No one is forecasting what this will do to land values.
