Recovery spreads
Strong demand for a limited pool of sites continues to drive land price growth. National greenfield development land values, excluding London, increased by 7.5% in the year to March 2014. Urban land values grew by 6.4% over the same period.
The South East’s resurgent housing market has driven greenfield land value growth across the region. Prices grew by 11.2% in the year to Q1 2014, followed by the land markets of the West at 6.8%. Regional averages disguise particularly buoyant local markets. In Crawley, Leamington Spa, Oxford, Sevenoaks and St Albans greenfield land values are in excess of 2007 highs.
The first quarter of 2014 also saw improved performance outside the highest value towns. Manchester, Leeds and Birmingham, bolstered by Help to Buy and improving new homes sales rates are now also experiencing land price growth and activity as housebuilders and developers secure new sites.
The first quarter of 2014 saw a marked shift in some northern land markets. Greenfield land prices increased by 8.1% in Q1 2014, with urban land values up 5% over the same period, albeit from a low base (greenfield and urban land here remains 53% and 69% below their former peaks). Higher value markets such as Durham and York continue to outperform, but cities such as Leeds are also beginning to benefit from the wider market recovery.
Land supply
Savills survey of greenfield sites coming to market recorded an uptick in the first quarter of 2014, indicating that the policies of the NPPF coupled with an improving market may be beginning to make a difference to land supply. 46% of the locations we monitor saw an increase in the number of sites coming to market, compared to just 19% posting an increase the prior quarter. The growth in new supply has been most marked in the South East where almost half of locations showed an increase in land supply, compared to just 10% of locations in Q4 2013.
There has already been an increase in the number of planning permissions following the introduction of the NPPF, coupled with a perceptible shift in sentiment in the housebuilding industry. This is having a positive impact on the land markets. According to our sentiment survey, agents reported positive conditions in 78% of locations we monitor, for 20% they cite ‘no change’, while on just 2% conditions have weakened in Q1 2014.
Nonetheless, strong demand for land from national builders ramping up output means that any new supply will be quickly absorbed. As an example, Bellway expects to increase volumes by 20% in its current financial year, and is replacing its landbank faster than build out rates as it prepares for growth. Some regional builders with intentions to become national players, such as Inland Homes, are scaling up operations, and adding to the demand for sites. Builders are increasingly willing to pay premiums to secure the right site in the face of increasing competition.
Land supply remains one of the greatest barriers to housing delivery, third only to planning delays and materials availability according to respondents of the quarterly HBF survey. According to the RICS UK Construction Market Survey Q1 2014, skills shortages are another market barrier that may threaten the pace of recovery.
.jpg)
.jpg)