UK greenfield and urban values fell by 1.7% and 1.8% in Q1 2023, marking 3.8% and 3.4% falls following the mini-budget and shift in housing market conditions, according to a report by Savills.
The report found consented sites between 50 and 150 homes in primary locations with no significant upfront infrastructure costs attracted the greatest interest and remained resilient in some areas.
Patrick Eve, head of regional development at Savills, said: “The market is more competitive in locations constrained by a lack of supply and a significant regional variation. In parts of the North of England and Wales there is appetite for land from a range of parties, supported by greater buyer affordability and a greater sales rate on new-build sites in these markets.
“In Wales, the new-build market is also supported by the extension of Help to Buy.”
Savills’ report said that at a national level there was a further softening of values in the last quarter as the market adjusted to more realistic pricing.
There is significant variation in both activity levels in the land market and the change in land values, the report said. But despite the challenging market backdrop, Savills said there are early signs that activity is picking up compared with the previous quarter.
Lydia McLaren, research analyst at Savills, said: “In the first quarter of 2023, the land market continued to be slow, with fewer transactions and new sites launching on to the market. It has 9% fewer Savills land deals in Q1 2023 compared with the same quarter last year.”
The London land market saw few transactions in Q1 but Savills said it indicates a downward pressure on values across the capital.
In central London, however, land values remained stable, increasing by 0.3% in the six months to March 2023. It was underpinned by activity from cash and overseas buyers with less reliance on borrowing.
Outer London was more affected by building cost inflation, slowing sales rates, the end of Help to Buy in England and rising mortgage rates.
Meanwhile, residential land values fell by 9.5% in the six months to March 2023, taking annual falls to 16%. However, there is variation across submarkets.
Demand has remained more robust for smaller sites in well-established upper mainstream markets and well-connected larger sites where there are opportunities for alternative residential uses such as BTR and student housing.
Eve added: “If the recent uptick in the new-build sales market is maintained, activity in the land market is likely to return by the summer as developers become increasingly confident to start on new sites alongside sustained demand from housing associations, BTR and PBSA developers.
“Our development agent sentiment survey also suggests early indications of improving appetite for land. However, there remains uncertainty over land values in the short term.”
“In some markets, a return to volume land sales may entail further downwards price adjustment.”
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