Savills reports South East land values holding up

Development land values in the South East have shown resilience despite a tougher economic outlook, according to the latest research from Savills.

The property advisor and Thames Tap partner’s latest development land index reveals that greenfield sites in the South East saw average price growth of 4.6 per cent in 12 months to the end of September, while urban land values increased by eight per cent during the same period.

The figures compare to UK average growth of 6.3 per cent for greenfield land and 6.2 per cent for urban land.

However, the rate of growth across the market nationally has slowed during the second part of the year and values in the South East remained flat during Q3, 2022.

Ed Keeling (pictured right), joint head of Savills’ south central development team, said: “A shortage of sites and continued demand for land from a range of parties has supported a robust market here in the Thames Valley.

“In the last few weeks alone we completed on three major transactions in Oxfordshire and Berkshire at a total value of £122 million, demonstrating the commitment we have seen from buyers for the right site in the right location.

“However, mounting pressures are now starting to subdue growth. After a period of exceptional strength, house prices are expected to fall, build costs are continuing to rise, the cost of debt is increasing and Help to Buy is ending. Looking forward, increased tender prices are unlikely to be offset by house price inflation.”

Savills says, across the UK land market, sentiment has become more subdued, with a net balance of +40 per cent of development agents reporting positive market sentiment in Q3, 2022, down from +74 per cent in Q2, 2022.

Growing concern about the future demand and pricing for new homes has also led many developers to become more selective, with major housebuilders focusing on securing larger sites of 100-plus units within core markets instead of smaller sites, according to Savills.

Savills is also seeing greater evidence of developers diversifying tenure. Piers de Winton, head of national residential investment and single family, operational capital markets, said: “As housebuilders look to de-risk sites, we have seen a growing appetite for single family build to rent in the Thames Valley.”

Tim Watson (pictured left), joint head of Savills’ south central development, said: “Recent disruption to the UK economy is undoubtedly starting to have an impact on the land market.

“These headwinds, including cost inflation and the rising cost of borrowing, are likely to have a particularly significant effect on smaller to medium-sized housebuilders, especially those that are highly geared.

“However, despite the more challenging climate, stock constraints continue to sustain competition to some extent, and well-designed sites in primary locations remain highly sought-after.”

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