Global property consultancy, Knight Frank, has launched its quarterly Land Index & Housebuilder Survey results, which reveal the sentiments of 50 volume and SME housebuilders alongside the latest performance and expert insight on the land market.
In the Q4 report, the results reveal a surge of optimism, with key indicators pointing to a potential brightening across the development landscape. Nearly 70% of those surveyed said they expect land values to remain stable in Q1 2024, unchanged from Q4 2023, with 10% even predicting a slight increase, and only 5% expecting a decline. This marks a significant improvement in sentiment compared to the results of Knight Frank’s survey the previous quarter, in which 50% of housebuilders anticipated a fall in land values.
According to Knight Frank, the overall trajectory points to renewed activity in the UK’s land and housing sectors in 2024. The report reveals that land values held steady in the final quarter of 2023 amid limited transactions, while several positive factors are indicating deal flow picking up over the coming months.
Charlie Hart, head of development land at Knight Frank, said: \”Despite a challenging 2023 steered by global geopolitical uncertainty, our clients are more optimistic about the sector\’s prospects for the year ahead. We expect the land market to gain momentum this quarter after a period of hesitation from both buyers and sellers. Pent-up demand for housing continues to grow even as inflation and mortgage rates moderate. This sets the stage for land transactions to pick up steam.”
Challenges have also been highlighted in the Q4 survey, revealing a third of housebuilders’ schemes have been impacted by nutrient neutrality rules. More critically, planning delays have worsened, with 90% of respondents now considering this as their biggest issue, up substantially from 82% last quarter.
While urban brownfield development faces high build costs and planning pressures, Knight Frank has said that housebuilder appetite remains especially robust for well-located greenfield sites, which are aimed predominantly at the upsizer market.
The UK’s economic backdrop has shifted, with annual inflation in low single digits and mortgage rates becoming more affordable. Some five-year fixed-rate deals are dipping under 4% this month, which according to Knight Frank should stimulate buyer demand.
The firm emphasised that housebuilders need to replenish their land banks to keep up with improving housing demand. This combination of factors is expected to unlock the stalemate between buyers and sellers in the land market.
Market confidence received a boost in Q4 thanks to two key factors, declining build cost inflation and improved mortgage availability according to Knight Frank. Concerns over these issues fell from 45% in Q3 to 31% of respondents in the latest survey.
Anna Ward, associate in the residential research team at Knight Frank, commented: “Early signs point to a much better year for land and development in 2024. Interest rates are levelling off and the pace of build cost growth has slowed substantially, so there are opportunities for forward-thinking developers to build now and sell in a few years into a market starved of stock. De-risking across large-scale projects through block sales to investors and operators in build-to-rent, student and seniors housing will also be key.”
