According to the report, housebuilders have returned to the market to replenish their sales pipelines after many withdrew in Q2.
Some have publicly confirmed resilient sales levels and completion rates despite the pandemic, noting a sustained period of demand during the summer as the market recovered from the first UK nationwide lockdown. Private London developers and well-funded, opportunistic buyers are also active in the market.
Average land values in prime central London rose 4.7% between July and September, meaning the residential development index has returned to levels seen in the first quarter of the year. Demand for homes outside of the capital has also returned and, accordingly, urban brownfield land values rose 3.8% between July and September, while greenfield values remained stable, ticking up 0.3% on the quarter.
Justin Gaze, Head of Residential Development Land at Knight Frank said: “The increase reflects a marked recovery in the capital’s housing market since the UK emerged from its first national lockdown.”
The quarterly increase reflects a marked recovery in the capital’s housing market since the UK emerged from its first lockdown, which contributed to a drop in land values earlier this year.”
However, on an annual basis, PCL land values were flat in Q3 compared to Q3 2019, while greenfield values fell 6.7% and brownfield values eased downwards by 1.8%.
Prices continue to be supported by a lack of supply in the market, with few sites coming forward due to the current uncertain economic climate and a shortage of allocated sites due to delays in the adoption of Local Plans.
Gaze added: “Whilst the majority of developers and housebuilders have re-entered the market, they remain selective and focused on sites that drive higher profit margins to reflect the increased economic uncertainty. Most are looking to maintain their balance sheets and preserve cash. For this reason, more land deals are being agreed on a conditional basis or with deferred land payments.”
