Savills : Housing land price growth stalls

Flat growth in the final quarter of 2018 left UK greenfield land values up just 1.9 per cent year on year, while urban land values averaged 6.2 per cent growth, latest analysis from the Savills residential development land index shows.

For the first time in two years, land values in the South East recorded marginal falls. Greenfield values were down by an average 0.6 per cent in the last three months of 2018, as house price growth slowed due to affordability constraints and political uncertainty.

By contrast, in Scotland and the Midlands - both regions that are at different points in their housing market cycle to London and the South East and continue to see house price growth - greenfield land values in these regions rose by up to 1.5 per cent in the final quarter of last year and up to 7.5 per cent year on year. House price growth of 4.8 per cent in Scotland, 5.5 per cent in the East Midlands and 5.3 per cent in the West Midlands, surpassed the national average of just 3.3 per cent, and underpinned demand for land.

Relative land market stability despite slowing price growth

Despite prevailing uncertainty, there is still new buyer interest for sites, Savills reports. Sentiment has remained remarkably resilient, with 97 per cent of respondents in the Savills land agent survey reporting positive or neutral sentiment.

However, high levels of supply of development land are adding to buyer caution. The success of new planning policy in bringing forward land for housing means the supply of permissioned land remains is also now well ahead of national housing delivery. Some 362,000 homes were granted consent in the year to end Q3 2018 against new housing delivery closer to 232,000.

'While rates of new build home sales have remained relatively stable, there are clear signs of increased home buyer caution and greater reliance on incentives to get sales over the line,' said Dr Lucy Greenwood, Savills residential research analyst. 'Clarity on Brexit would make a big difference to this picture.

'Over the mid-term, cyclical changes in the housing market and housing policy will continue to dictate both turnover of development land and the price at which land trades in different locations. This said, land values are currently pitched at a lower level relative to house prices than in previous cycles, which will minimise the downside risk.'