UK housebuilders are taking a more active role in the land market, buoyed by interest rate cuts and stronger than expected house price growth, according to Knight Frank’s latest Land Index & Housebuilder Survey Q4 findings.
Overall, 60% of over 50 volume and SME developers surveyed by Knight Frank across England said housebuilders were the most active group in the land market in their region during the final quarter of 2024. This marks a two-year quarterly high and is up from a third who said this in the final quarter of 2023.
It comes as the Bank of England cuts interest rates for the third time in just over six months, leaving the base rate at 4.5%.
UK house prices rose more than expected last year, rising 4.7% in the year to December 2024, making it the third strongest calendar year of the past decade, following 2020 and 2021, according to Nationwide.
Over 60% of respondents said interest rate cuts, followed by planning reform (46%) and a further fall in land pricing would most increase their appetite for land and new development. Already, circa 60% of respondents said that so far, falling mortgage costs have most helped support sales, up from just over half who said this in the previous quarter.
Looking ahead, further rate cuts are expected throughout 2025 as the Bank of England contends with signs of a stagnating economy.
According to Knight Frank, a fifth of survey respondents said that offering incentives had helped to support sales in 2024. In total, over half said they were offering price discounts, with another 50% also offering non-cash items such as carpets and white goods and the same proportion providing contributions to legal fees and stamp duty.
The firm’s survey also reveals that recent changes to planning policy are starting to have a tangible impact. Last year the government set out proposals in the National Planning Policy Framework (NPPF) to reinstate mandatory housing targets, ease greenbelt restrictions, and support economic growth through infrastructure development.
The study found that the proportion of housebuilders citing planning delays as their primary business pressure has fallen to 70%—the lowest level in over three years.
Charlie Hart, head of development land at Knight Frank, commented: “We’re seeing encouraging signs in the land market, housebuilders are entering 2025 with a little more optimism compared to this time last year. It’s great to see local authorities take a more proactive approach to site assessments and housing allocations.
“While the UK housebuilding sector has ramped up land market activity, this won’t be enough to fully address housing demand. Viability remains a significant constraint, especially for medium-density urban development, and delivering new homes in our cities will be key to meeting housing targets as we move through the year.”
Despite ongoing economic pressures, land values across England remained stable in Q4 2024, with developers anticipating a steady market in early 2025. According to the survey, 65% of developers expect land pricing to remain flat in Q1 2025, while 20% anticipate an increase and 15% predict a decline. Meanwhile, Prime Central London land values are holding steady, with high-quality sites still appealing to developers focusing on medium- to long-term opportunities.
Anna Ward, associate in the residential development research team at Knight Frank, commented: “While inflation is easing and further interest rate cuts expected, the lack of first-time buyer support and current market conditions have led housebuilders to offer incentives to boost sales. In the land market, demand remains strongest for greenfield sites, with growing interest in strategic land as planning restrictions relax, reflecting housebuilders’ long-term focus.”
Read the orginal article: https://propertyindustryeye.com/housebuilders-ramp-up-land-buying/
