Citing low levels of housing completions, some commentators have claimed development land is being hoarded unnecessarily as landowners wait for values to increase. Our analysis of the permissioned landbanks of the top eight listed housebuilders would suggest otherwise, see Graph 1 below.

Permissioned land held by the top eight fell by around 100,000 plots between 2007 and 2012, as land buying slowed and existing stocks were built out. Relative to recovering build rates, the supply of land held by housebuilders is in fact falling. In 2009 the volume of permissioned land held by the top eight peaked at held 7.5 years of permissioned land, as the rate of delivery slowed.

In 2012, permissioned landbanks declined to 5.3 years supply. Some builders, such as Barratt, are actively targeting shorter landbanks to improve capital efficiency.

These headline supply figures are deceiving as not all of this permissioned supply will be financially viable to develop in the short term. Landbanks will include permissioned land in weaker markets, and larger sites that need to be phased for delivery.

Help to Buy will aid the rate of delivery of land in marginal locations. An emerging build to rent sector offers the opportunity to increase delivery while creating a reliable income stream.

Housebuilders are actively finding ways of improving return on capital and examples are emerging of how institutional forward funding of build to rent can boost this measure.

Part of the challenge lies in bringing forward those permissioned sites not under the control of developers and housebuilders. In London, Molior has concluded that 45% of permitted sites are held by ‘non-builders’, but note that many of these are historic landowners (rather than speculative purchasers), or are in public hands. Not all this land will be viable. Growing demand, emerging investment in the private rented sector and broader industry expansion will help to unlock more of this land for delivery.

Taken from
Market in Minutes: UK Residential Development Land