Green agenda ‘putting pressure’ on land values, says Savills

Research by Savills says UK residential development land values have picked up across the market after a two-year period of mostly static prices.

The real estate adviser said uncertainty peaked in the final quarter of 2019 leading up to the election with slowing transactional activity and deals taking longer to complete in some areas of the country.

But the election result has caused a rapid rise in confidence both amongst buyers of land and in the housing market, with greenfield land, urban land and house prices all rising at the end of 2019.

The eastern region was the strongest performer, with greenfield land values up 2.2% in 2019 and urban land up 2.5%, because of affordability in the lower value parts of the market, resilient sales rates and competition for sites in secondary locations.

However, while house prices are now an average 16% above their 2007/08 peak, greenfield land values remain down 11.7% and urban land values down 22.0%.

Lucy Greenwood, an associate director in the Savills residential research team, said the higher costs associated with building energy efficient and sustainable homes are putting pressure on land values.

The Ministry of Housing has estimated that the additional costs to meet ‘green’ housing standards from 2020 are £4,487 for a house and £2,256 for a flat.

Small sites, particularly those with 80-150 plots, are in demand from both large and SME housebuilders because of their speed to build and lower risk, yet the availability of land is seen as a major restriction for them.

With high quality design of building and places becoming more central to the planning process, Savills said this could lead to higher costs for planning and building.