Savills Research UK Development savills.com/research
Market in Minutes | January 2018 UK residential development land
STRATEGIC LAND
Summary Land values are growing faster than average in the North and Scotland, while housing associations are increasingly competitive in their land buying with strategic land becoming popular
Land values are Housebuilders have Major housebuilders Medium-sized Strategic land is a focus growing faster than enjoyed a relatively are replacing land they housebuilders are buying for a range of developers average in the North, benign land market have built out, sourcing larger sites, increasing and investors. In the last where we forecast recently, thanks to more permissioned land from an average of 72 year, Savills was involved higher than average limited competition and from their own strategic plots per site in 2016 to in the sale of several house prices in the next a growing number of pipelines, focusing 87 plots per site in 2017. strategic land portfolios, five years. Investment consents being delivered. on controlled growth. Housing associations totalling 60,000 plots. by Homes England is Unless land supply This has resulted in have become more The major housebuilders supporting development continues to grow, this is slow growth of competitive in the are buying more of this in this region, helping likely to change as more greenfield land values market, refining their longer-term land. to increase the number developers, including (1.7% annual growth). payment options. of developers in the housing associations, are market to meet local now competing for sites. housing need.
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Manchester Majors continue measured approach leads the way Major housebuilders are replacing land they The major housebuilders have been able In the past year, urban land values in have built out, sourcing more permissioned to buy land at or above their hurdle rates. Manchester rose 24%, compared with 4% land from their own strategic pipelines while In its annual report, Bellway stated: “We for the UK as a whole. Strong house price focusing on controlled growth of completions. will continue to acquire land which meets or growth in this relatively a ordable market More consents and relatively low numbers of exceeds our acquisition criteria”. Meanwhile, has supported the increase. developers compared with before the global in its latest trading update, Barratt said: House prices in Manchester rose by 8.6% fi nancial crisis, means the land market “The land market remains favourable and in the 12 months to October 2017, more than remains relatively benign. we have secured attractive land opportunities double the national average of 4.2%. The In the year to June 2017, 16% more consents which exceed our minimum hurdle rates.” market has been gaining momentum with were granted in England compared with the Some 25% of Barratt’s completions in the greater belief in the future for the city as previous year. However, there are fewer last year have been on land from their strategic development continues. developers, with only 53% of the number of pipeline. Savills sold 8% more plots year There have been more land buyers bidding builders currently registered with the National on year to the major housebuilders between for sites, including housing associations House Building Council (NHBC) compared 2013 and 2017, refl ecting the measured who are bidding competitively on sites which with the average between 1995 and 2007. growth in land buying. were previously only of interest to the PLCs. As a result, greenfi eld land values remain Most of the major housebuilders are relatively fl at. Values rose 0.1% in the last planning for controlled growth in completions. quarter of 2017, taking annual growth to Completions by eight of the PLC 1.7% – in line with 2016 growth of 1.8%. housebuilders (those with published data The land market therefore remains for 2017) increased by 6.1% on average benign, with land value growth remaining between 2016 and 2017, in line with growth below house price growth on average. over the previous two years.
Recovery rate Land values have grown more slowly Rise in urban than house prices since the global fi nancial crisis land values* New house prices Greenfi eld land values 140 24% (Manchester) 120 4% (National 100 average) 80
60 Index (100=Q3 2007) 40
20
0 Rise in
house prices** Q4 2011 Q4 1995 Q4 1997 Q4 1999 Q4 2001 Q4 2003 Q4 2005 Q4 2007 Q4 2009 Q4 2013 Q4 2015 Q4 2017 8.6% Source Savills Research, Nationwide Note Land values exclude London (Manchester) 4.2% Look north for greenfi eld growth (National Over the last 12 months, greenfi eld land 17-18% over the next fi ve years, compared average) values in Scotland and the north of England with 14% for the UK. have grown faster than the national average, Investment by Homes England (formally increasing by 4.2% and 2.7% respectively, HCA) has supported developments across compared with 1.7% for the UK. the country. According to Savills agents, Source Savills Research Notes *12 months to House prices in these regions are more investment in sites in the North has helped December 2017. **12 months to October 2017 a ordable and we forecast them to grow by grow confi dence in the development market.
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Diversity drives competition Strategic focus
Savills agents are seeing more developers These developers tend to be building Strategic land is being sought by a range becoming active in the land market. apartment blocks targeted at people of developers and investors. In the last There is competition for sites across the working in London who are looking for year, Savills was involved with the sale of market from medium-sized housebuilders, more affordable homes outside the city. several strategic land portfolios, totalling developers and housing associations, Across the UK, urban development land 60,000 plots. supporting land values and pushing them values increased by 0.5% in Q4 2017, with Among the major housebuilders, up in some areas. annual growth of 4.0%, more than double Bellway acquired 9.5% more strategic plots Medium-sized housebuilders bought the growth in greenfield land values. in 2017 than 2016, while the value of Crest’s 54% more plots through Savills in 2017 Larger housing associations are strategic land increased by 16.5% between than in 2015 (10% more than 2016), mostly becoming more active in the Oxfordshire- 2016 and 2017. through larger than average site sizes. Buckinghamshire area, along with other Acquiring strategic land continues to The median site size bought by SME housebuilders. This area is particularly be a key strategy. Barratt plans to continue medium-sized housebuilders through attractive for several key reasons: its to build 25% of its homes on land sourced Savills increased from 72 plots in 2016 connectivity to London and other strong from its strategic pipeline while Linden to 87 plots in 2017. This reflects their employment markets; its location beyond aims to get to similar levels by 2021. Relying New house prices Greenfield land values continued growth supported by better the London green belt; and government more on strategic land allows the major availability of finance. support for strategic development in the housebuilders to retain greater control over London developers have been moving Oxford-Cambridge corridor. their land pipelines and maintain margins, beyond the capital, supporting or pushing To maintain relatively benign land albeit there is planning risk involved. up urban land values in markets such as market conditions with additional Woking, Guildford and Chelmsford. developers, more consents will be needed. 60,000 Urban generation Urban land value growth continues to Number of plots related outperform greenfield land, albeit from a lower base to strategic land sold by Savills in the last year UK urban UK greenfield Central London residential
140 Government support
In the Autumn Budget, the Chancellor 120 announced new measures for supporting housebuilding to reach delivery levels of 100 300,000 homes per year in England. A focus of the Government’s plan is the 80 Oxford-Milton Keynes-Cambridge corridor. If the area is to maximise its economic 60 potential, up to one million homes will need to be built in the corridor by 2050. It is likely that at least one of the new 40 garden towns proposed in the Budget will Index (100=2007/08 peak) (100=2007/08 Index be within this corridor to support such 20 growth. The Government has also agreed a housing deal with Oxfordshire to target 0 delivering 100,000 homes in the county by 2031 in return for a package of support for infrastructure and economic growth. Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Much of the land around Oxford is already being promoted, and landowners will be seeking development partners in Source Savills Research due course.
Savills team Jim Ward Lucy Greenwood Emily Williams Director Associate Associate Please contact Residential Research Residential Research Residential Research us for further 020 7016 8841 020 7016 3882 020 7016 3896 information [email protected] [email protected] [email protected]
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