18th May, 2010.

Has the Residential Land Market Recovered?

By Marc Wilson MRICS, Residential Development Department.

Finally a good news story, the annual rate of UK house price inflation has hit double figures for the first time since June 2007, according to the Nationwide.  But has the housing and development land markets really recovered?

Well, things are certainly busier than this time last year.  Enquiries are on the up and improving, housing developers appear to have resurfaced and are recruiting staff to work through new land opportunities and we are receiving more offers.  However, whilst things are definitely improving, we are some way off a full recovery. 

Economically speaking, the next 12-18 months is going to be tough.  The huge national debt will impact on us all with an increase in taxes, poor job prospects in certain sectors and a general lack of confidence, not really ideal conditions to be buying a new home.  To compound matters many financial commentators are suggesting that we are likely to see an increase in the Bank of England base rate making mortgage availability even more difficult.

However, things are predicted to improve by late 2011 onwards, with 2012 likely to be a good year for house sales.  For this reason housing developers are frantically acquiring land opportunities now to have completed units on the market come healthier times.  Whilst we are experiencing more demand, we are seeing a wide variation across geographical locations.  The focus has shifted away secondary locations to better and prime locations where developers are able to attract purchasers with equity and access to better priced mortgages.

There is also a change in the type of properties which being built.  Purchasers are much more informed and are steering away from smaller properties with limited parking.  Therefore, developers are no longer seeking to maximise densities with flats and townhouses.  The majority of schemes being tabled at present are for traditional family housing.

So it’s fair to say that land purchase activity is on the up, but demographics and product are key considerations.  In certain circumstances, where the demographics are right we are seeing some strong competitive bids being put forward.  Although, land sales in secondary locations remain difficult.

Land values are still down from the height of the market, but this is likely to be the case for some time, due in part to the fact that developers do not wish to build to the same densities as they did in 2007 and are working to higher margins that reflect the more uncertain market conditions.  However, mothballing a development site is not always the right approach.  House building is set to get more expensive with the cost of labour and materials going up and the introduction of the new building regulations and Code Level 3 for sustainable homes.  Further obligations in terms of increased section 106 contributions and community infrastructure levies will also offset any gains achieved in Gross Development Value (GDV) by delaying a land sale. 

To conclude, if you are or your clients are sitting on land which has development potential it would pay to look at disposal options sooner rather than later.  Harris Lamb are currently working alongside a variety landowners and housing developers in order to maximise land value either through subject to planning disposals, option agreements, planning promotions etc.  Harris Lamb are widely regarded as experts within Land and Planning and are happy to explore the options that are right for you.

If you would like to speak with Marc about any of the issues raised in his blog, please feel free to contact him on +44(0)121 4559455 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .