Budget boosts land value revival
Key growth areas are greenfield land in the north, which has seen more positive movements than the south, with an average price paid increase of 1.30% in Q2 2024 from the previous quarter, compared to -3.20% across the UK generally.
In the southeast, by contrast, greenfield land values have fallen by -1.10%. Urban sites are yet to recover from the higher cost of debt and growing build costs. In parts of the southwest, there is a limited market for high-density flat-led schemes, both Build to Rent and for-sale schemes, and the pools of buyers have vastly reduced.
Even in areas of chronically low supply to demand such as London, residential land values fell between -1.10% (central London) to 10.50% (outer London) year on year to September 2024.
PLC housebuilders are also returning to the market for land opportunities of all sizes, mainly focusing on 50+ unit sites, meanwhile smaller housebuilders continue to take advantage of both brownfield, greenfield and conversion opportunities.
Mergers and acquisitions continue to be discussed to de-risk large sites and provide alternative routes to delivery. For example, in September 2024, Lloyds Bank announced they are the third partner in funding major housing developments across the UK, alongside Barratt Developments in their joint venture with Homes England.
These three entities are coming together as the new Made Partnership, a ‘master developer’ hoping to deliver placemaking developments from 1,000-10,000 homes on both brownfield sites and in new garden village-style communities. Equity funding of up to £150 million will be provided equally by the partners in what is hoped to catalyse housing delivery.
National Housebuilder Review
Looking to key movements amongst the national builders this year, despite a 19% decrease in total land spend in 2024 by Persimmon, housing completions improved by 5% year on year. The total number of plots in their land bank rose to 3%, meaning over 38,000 plots have detailed planning consent.
By contract, however, Bellway experienced a significant reduction in housing completions in 2024 (c.30%) compared to 2023, with 2.90% less in their land bank. They had circa. 2,000 fewer plots with detailed planning permission and just 18,000 plots pending permission, 16% down on 2023 (21,400). As a result, Bellway’s preliminary 2024 report has seen a -3.10% fall in their private average selling price.
Major housebuilder Barratt Homes saw its profits fall by 75% year on year in Q3 2024, blaming “cost-of-living pressures, much higher mortgage rates and limited consumer confidence”. Their financial reporting showed 14,004 home completions in total, decreasing from 17,206 the year before.
Meanwhile, Legal & General announced the sale of CALA Group to simplify their portfolio, increase shareholder returns and deliver sustainable growth, in a deal worth £1.35bn over the next five years.
In May, the number of house reservations had increased back to summer 2022 levels, and were broadly the same as the average pre-pandemic levels, with house prices beginning to creep back up. This trend has continued into October, and should start to ease the viability gap that we saw in 2022-23.
When it comes to international residential players, Australian investor and developer Lendlease retrenched its UK operations, putting up Deptford Landings, Elephant Park, Wandsworth and Potato Wharf for sale.
What lies ahead?
The honest answer is that it’s a bit of a mixed picture for the residential property market as we look ahead.
Whilst there are undoubtedly some green shoots to feel upbeat about, it is hard to say with any great certainty what we can expect from 2025.
The market has been improving but the imbalance between housing supply and demand remains a core issue, along with viability.
Residential development viability for urban sites remains constrained, particularly where works are being undertaken to existing buildings, as the cost differential between conversion and new-build narrows.
However, average land values in these areas showed signs of stabilising throughout summer. Nationally, residential land agents are reporting positive market sentiment and we feel confident that this should bode well as we look ahead to 2025.
What we do know for certain, is that the government, with all the changes it has announced, is committed to unlocking land supply to deliver against their ambitious targets to deliver 1.5 million new homes, and this has to be a good thing for the residential property market and those developers active in it.
