A recovering market

Since the summer the land market has picked up again in many parts of the UK. Sentiment and the number of bids per site has improved, and land values have returned to growth. However, there remains variation across the country and activity in the land market is concentrated in stronger markets.

Positive sentiment returns for low risk sites

According to our survey of Savills agents, sentiment for both greenfield and urban sites was more positive in Q4 than in Q3, when there was much caution in the land market due to uncertainty after the Brexit vote. The number of bids per site was, on balance, more positive than the negative result in the previous quarter.

However, there is still caution in some parts of the country which means that larger housebuilders are continuing to bid selectively. In general, land buyers are taking less risk, focussing on oven-ready sites in areas of stronger home buyer and renter demand, close to established residential areas or good infrastructure.

Generally, there is less demand for sites in more rural or economically weaker markets and for those needing remediation.

^{Source: Savills Research, survey of land agents' opinion across 81 greenfield and 50 urban locations in England, Wales and Scotland}

^{Source: Savills Research survey of land agents' opinion, DCLG}

Land transactions lower

Although activity in the land market picked up after a dip immediately following the Referendum, caution in the second half of 2016 means that transactions of development land have been lower than in the previous year. The appetite for land remains robust but the more selective nature of housebuilders means that deals are taking longer to achieve.

Urban land values increase more than for greenfield

Urban land values have increased more strongly than values for greenfield land over the last quarter, picking up from the slow or negative growth in Q3 2016 following the Brexit vote. On a UK wide basis urban development land values increased by 1.2% in the last quarter of 2016 bringing annual growth to 3.6% while greenfield development land values increased by 0.5% in Q4 2016 with annual growth of 1.7%.

Regional cities demand

Growth in regional cities including Birmingham, Manchester and Glasgow contributed to the demand for urban land, pushing up values. In Birmingham, where land values increased in Q3 despite the Brexit vote, demand for sites is strong from PRS and institutional funds.

In Manchester it is suburban brownfield sites, just outside the very centre of the city, that are drawing strong demand as developers look beyond the city apartment market for alternative opportunities. Glasgow has a lack of supply of sites in prime locations which continues to drive land values in these markets.