Demand for development land set to increase despite drop-off in sales and bids last quarter

Lydia McLaren, associate director at Savills, said the falls are “reflective of a subdued new build sales market”.

She added: “Many developers are more cost-conscious at the moment in order to remain as profitable as they can in weaker sales market conditions, which is resulting in less land-buying and/or more conservative bid prices.”

However, analysts pointed to improved sentiment as evidence that the demand for land is likely to grow if wider market conditions continue to improve.

Recent falls in mortgage rates and greater market stability have helped sentiment, Savills said.

UK house price growth remained flat in December, taking 2023 annual house price falls to just -1.8%, according to Nationwide.

As a result, more sites are likely to launch onto the market in the first half of 2024, albeit with medium-term supply expected to remain constrained because of a slowdown in the number of sites given planning consent.

In England, 28% fewer homes were given planning consent in the 12 months to September 2023, compared to a 2021 peak, according to the Home Builders Federation.

Patrick Eve, head of UK regional development at Savills, said: “Levels of competition in the land market will likely remain muted until all the major house builders become more active. 

“With considerable variation in the size of the major house builders’ land pipelines, we expect some house builders to increase their activity in the land market earlier than others in order to replenish land pipelines which will boost competition for sites.”

Savills recently hired two housing regulation experts, including a former long-serving director at the English regulator, to boost its affordable housing consultancy arm.