UK land values slide as sales slow and financing costs rise
A slowdown in private sales, higher financing costs, and economic uncertainty caused UK urban brownfield values to fall by 8.5% in Q4 2022.
UK greenfield values also fell by 3.5% taking the annual change to -1.3% and -9.2% in terms of urban brownfield values, according to Knight Frank’s Residential Development Land Index Q4 report that was published today.
Knight Frank surveyed 35 SME and volume housebuilders across the regions. Of these, 52% of respondents said they expected land values to fall in Q1 2023, as higher interest rates and financing costs add an element of caution to the market.
A slowdown in private sales, higher financing costs, and economic uncertainty caused UK urban brownfield values to fall by 8.5% in Q4 2022.
UK greenfield values also fell by 3.5% taking the annual change to -1.3% and -9.2% in terms of urban brownfield values, according to Knight Frank’s Residential Development Land Index Q4 report that was published today.
Knight Frank surveyed 35 SME and volume housebuilders across the regions. Of these, 52% of respondents said they expected land values to fall in Q1 2023, as higher interest rates and financing costs add an element of caution to the market.
However, prime central London bucked the national trend as an ongoing scarcity of sites for sale meant values were flat on a quarterly basis and up by 2.5% annually.
Q4 2022 saw a fall in site visits and reservations for new homes, as reported by 79% of the respondents in Knight Frank’s survey.
Cost of living pressures had a “significant” impact on demand for new homes, according to 42% of respondents.
In the coming months, the lack of availability of land relative to demand should mitigate significant falls in land values with 85% of survey respondents saying land availability was either limited or very limited.
The challenging sales market has also led housebuilders to consider ways to de-risk sites, including through diversifying products and tenures.
Some 44% of survey respondents said that sales to build-to-rent investors will play a greater role in the market in 2023.
For private sales, 59% of respondents said they plan to offer more incentives to encourage buyers, while 22% and 31% think the First Homes and Deposit Unlock schemes will help boost sales respectively.
What are the key challenges for the sector?
% of respondents (choose up to three)Q4 2022Next 3 monthsAffordable housing requirements6%3%Availability of development finance3%3%Availability of land27%27%Construction delays21%6%Mortgage availability/cost45%42%Buyer sentiment39%39%Labour costs12%3%Skills/labour availability12%6%Material costs/availability33%15%Outlook for the UK economy36%36%Environmental and ecological regs21%24%Planning delays73%76%Other0%3%
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