Fewer sites coming to market and varying demand has prompted a fall in development land values in the East of England, according to new research by Savills.
According to the report by the global property consultant, the drop underlines slower activity nationally.
However, despite the downward market pressures, values for optimum-sized, ‘oven-ready’ sites with planning permission and surrounding infrastructure are holding firm.
The Savills research showed greenfield development land values have dropped 8.6 per cent in the East of England within the last year, compared to 8.0 per cent across the UK. Meanwhile urban land values have dropped 7.5 per cent, compared to a national average of 8.7 per cent.
Holly Woolley, associate in the development team at Savills in Norwich, covering Norfolk and Suffolk (pictured right), said: “The sites attracting the highest demand are those deliverable, low-risk sites which are also, typically, in the shortest supply – those with planning permission already agreed, in areas where there is strong demand for new homes and where a good level of infrastructure is already in place. So there is certainly pockets of resilience being seen.
“In contrast, there is significantly reduced demand for sites which pose higher risks relating to constraints, conditions and costs – which in Norfolk includes the challenges surrounding nutrient neutrality.”
The South East witnessed the largest percentage change in annual land values, with greenfield and urban sites dropping 9.3 per cent and 12.2 per cent respectively, indicating heightened affordability pressures.
Holly continued: “While the buyer pool for sites is on the whole thinner, activity is varied as parties adapt to changing market conditions. The major housebuilders remain cautious and largely focused on building out their existing pipelines, but there are some volume housebuilders who are active, bidding competitively to secure land.
“Likewise, SMEs and regional housebuilders are taking advantage of a less competitive market to secure land and maintain their pipelines, with some looking beyond their local patch.”
The Savills report also reveals that bulk sales to housing associations and Build-to-Rent investors have become increasingly widespread and are supporting the new build market through underwriting risk on sites and diversifying large schemes. Private housebuilders backed by private finance also continue to be key players as they seek opportunities to realise their strong growth ambitions.
Richard Janes, who leads the development team for Savills in Cambridge (pictured left), said: “There will likely be less sites sold in the short term due to fewer gaining planning consent and, in some cases, landowners of less popular sites waiting for demand to return before selling.
“Development land values will continue to experience downward pressure in the short term given the challenges faced by the new homes market and rising costs associated with developing and building sites.
“Additionally, land values may need to adjust where alternative tenures such as Build-to-Rent and affordable housing are being planned. There is significant need and demand for these tenures alongside market sale, but they often need to be at a discount to make the scheme viable.
“More generally, due to the ongoing scarcity of land supply and the failure to resolve uncertainty in the planning system, the competition for sites is likely to remain concentrated on oven-ready sites, and land values for these types of sites are therefore likely to fall less than we might otherwise expect.”
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