One emerging trend that bodes well for the new work pipeline in private housing is the return of housebuilders to the development land market.
Encouraged by improving new homes sales rates, reduced build cost inflation, and more stability in the wider housing market, developers have been acquiring more sites.
The recent report from Savills highlighted an improving mood in the residential land development sector. A net balance of 73% of its agents reported ‘positive market sentiment’ in the first quarter of this year, up from 21% during the previous three months.
The agent has seen an uptick in the number of new sites launching onto the market, in bids per site, and in the number of land deals being struck as more parties look to re-enter the land market after being dormant in 2023.
Land prices have stayed largely flat so far this year but they remain well down on a year ago, which in turn should encourage new development. Greenfield land values in the UK in March stood 4.8% lower than a year earlier and urban land values were down by 6.5%, according to Savills.
The agent’s report also highlights the types of sites in strongest demand and where future construction work is most likely to materialise.
Housing sites in prime locations with planning permission which provide guaranteed scale where housebuilders can be certain of delivering schemes are selling well and holding their values. So-called ‘oven-ready’ sites in secondary towns and villages where buyers can easily commute to cities also remain in high demand.
But developers’ appetite for flat-led urban schemes remains subdued. The new requirement for an additional staircase for residential buildings over 18 m tall (six storeys) has threatened the viability of many schemes.
Meanwhile, the Residential Development Land Index from agent Knight Frank pointed to a notable increase in new sites coming to market which it says means transactions should build later this year.
Nearly two-thirds (64%) of its survey of 50 volume and SME housebuilders and developers said a cut in interest rates would most increase their appetite for development land. Most of its respondents (80%) also think that a Labour government would do most to enhance the land development market.
Rising value of housing starts
The growing overall demand for housing development sites lends weight to Glenigan’s Construction Industry Forecast 2024-25 which predicts a 4% rise in the value of underlying private starts in 2024 followed by a further 11% rise in 2025.
The major volume housebuilders have become notably busier in the land market. Bellway recently said that given the improving outlook on lower interest rates and house price stability, it has been more active in the land market since the start of this year. The firm’s future pipeline of potential land acquisitions is rebuilding, with terms agreed on around 6,600 plots as at mid-March.
One significant Bellway site where details plans have recently been granted is a £36.11 million scheme development at Field Lane Greenleys, Milton Keynes. Work on the project involving 98 houses, 12 flats and a sports pitch is due to start later this year and run for 17 months (Project ID: 20319711).
Fellow housebuilder Taylor Wimpey is focusing on the conversion of new house plots from its longer term strategic pipeline and it has brought forward around 1,500 plots into its short term landbank for development in the first quarter. So far this year, the firm has also approved the purchase of around 1,400 new housing plots.
One significant Taylor Wimpey scheme where planning has recently been approved is a £76.15 million development of 204 houses and 42 flats in Oxfordshire. Work on Primrose Gardens Phase 1 in Didcot is due to start early in 2025 and run for 20 months (Project ID: 22130319).
Meanwhile, at Southend-on-Sea, conditions are being finalised with the council on a £21.8 million Taylor Wimpey (East London) scheme of 58 houses and 12 flats at Artillery Mews (pictured). Work is due to start this coming autumn and run for 13 months (Project ID: 22154601).
