The latest Residential Development Land report from Savills highlights the current state of the land market in the UK, and while the market has slowed down in the first quarter of 2023, there are still many positive aspects to consider.

Although there were fewer land transactions and new sites launched onto the market, this reflects the wider slowdown in the housing market and the loss of the Help to Buy scheme. Despite this, there has been a modest uptick in activity in the new build sales market since the start of the year, with average sales rates increasing from 0.3 in December 2022 to 0.6 per outlet per week in February 2023. This is supported by the easing in the cost and availability of mortgages, coupled with a scarce supply of homes for sale in the second-hand market.

The lack of land transactions in the market makes it difficult to assess the movement in development land values in Q1 2023. The Savills Development Land Index shows further softening in land values over the last quarter as the market adjusts to more realistic pricing. However, there is still significant variation in both activity levels and the change in land values on a site-by-site basis. Sites in undersupplied markets are holding their value and remain in demand.

In addition, there are signs that the market is picking up compared to the previous quarter, with a net balance of 23% of Savills development agents reporting positive market sentiment, up from -3% in December 2022. The Savills sentiment survey also reveals a slight improvement in the net balance of agents reporting new sites coming to the market and the number of bids per site.

Oven-ready consented sites between 50 and 150 units in primary locations with no significant upfront infrastructure costs are attracting the greatest interest from parties and are remaining resilient in some locations. Land buying is more competitive in locations that are heavily constrained by a lack of supply. For example, sites in the East of England, such as St Albans, are selling well due to the significant undersupply of consented land in these markets.

There is also significant regional variation in the market. In parts of the North and Wales, there is appetite for land from a range of parties, supported by greater buyer affordability and stronger sales rates on new build sites in these markets. In Wales, the new build market is also being supported by the extension of the Help to Buy scheme. Northern greenfield and urban values at March 2023 have remained on par with December levels.

Overall, while the land market may have slowed down in Q1 2023, there are still positive signs of growth and activity. Despite a fall in land values, the market is adjusting to more realistic pricing, and there is still demand for sites in undersupplied markets. This creates opportunities for property developers to invest in these areas, particularly in primary locations with no significant upfront infrastructure costs. The variation in activity levels and change in land values on a site-by-site basis provides room for negotiation and opportunities to acquire land at favourable prices.

Savills report is available here.