Savills has reported that, after a period of exceptional strength, the development land market slowed over Q4, 2022 as wider market uncertainty took hold. 

According to a new report by real estate advisor, greenfield and urban land values fell by 2.2 per cent and 1.6 per cent respectively in Q4, 2022, taking annual growth to two per cent and 2.7 per cent. This marks the largest quarterly fall in land values in the index since Q2, 2009.

Looking ahead

Ian Fowler (pictured), head of Savills’ South East development team based in Guildford, said: “As a result of falling demand from some areas of the market, and predicted fewer transactions during the first half of 2023, Savills expects land values to continue to soften from their recent highs, returning to pre-pandemic norms which account for realistic build costs, environmental costs and house price forecasts.

“In the short term, we expect major housebuilders to be much more selective in their land buying activity while they wait for sales rates to pick up. However, this will provide more opportunities for housing associations and well financed regional and SME housebuilders to acquire sites having been out-bid over the last year due to the exceptionally strong competition.

“In the medium term, we expect demand for sites to increase as those that have paused land buying refill their pipelines. With changes to planning policy likely to reduce the number of sites gaining consent, we also expect the supply of consented sites to reduce. As a result, land values are likely to remain resilient in the medium term.”

Wait and see: future performance of sales rates

In conjunction with a tougher economic climate, the new build market is also challenged by the end of the Government’s Help to Buys scheme, which had enabled new homes to take a greater share of overall market activity (accounting for 31.4 per cent of all new homes sales since its inception).

Savills reports that major housebuilders have cut back on land buying in an effort to ride out the weaker sales market, with some pausing activity altogether.

“With the average stated landbank across the major housebuilders of 5.1 years in 2022, the major housebuilders are able to pause activity to monitor future sales over the next few months and reassess land buying decisions. The future performance of sales rates in Q1, 2023 will likely determine future land buying strategy for the major housebuilders,” said Mr Fowler.

“However, strategic land remains a key priority for many players in the land market as it is less exposed to cyclical market conditions. Over the last quarter, there has been an increase in appetite for longer term land opportunities requiring less upfront expenditure.”

A net balance of 83 per cent of Savills development agents reported increased interest in strategic land in Q4, 2022, significantly higher than the previous quarter at 33 per cent.

Deals in 2022

Despite a tougher market, particularly when compared to the highs of 2021, Savills South East development team transacted on 17 sites in 2022, equating to a combined land value of £200 million. The total represents the sale of 2,795 plots across the region.

Notable deals in the region included more than 1,000 plots to Redrow in Manston, Kent, more than 300 apartments to Tiger Developments/VHML in Guildford and 220 homes and a convenience store at Hailsham, East Sussex.

Mr Fowler continued: “The South East land market in 2022 was always expected to be more subdued than 2021, which set a high benchmark. The recent slowdown of new build sales rates has considerably impacted sentiment in the land market and, combined with the recent slowing of house price growth and stretched mortgage affordability, has led to land buyers to reconsider their strategy on land buying both regionally and across London’s markets.”

The net balance of Savills development agents reporting new sites launching onto the market fell to its lowest levels seen in over 10 years, at -54 per cent in Q4.

© Thames Tap (powered by

Sign up to receive our weekly free journal, The Forum here.