2021-10-07-莱坊-UK_Res_Dev_Land_Index_Q3_2021_3页_1mb

Residential Development Land Index Summary - Q3 2021

Core Content

The Residential Development Land Index for Q3 2021 highlights the ongoing challenges and trends in the UK housing development market. Land prices across different types of sites have shown varying degrees of growth, while housebuilders face increasing pressures from supply chain issues, material costs, and planning delays.

Key Trends and Statistics

• Greenfield land prices increased by 5.5% in Q3 2021, marking a 14.7% annual rise.
• Urban brownfield land values rose by 2.5% this quarter and 3% year-on-year.
• PCL (Prime Central London) land prices remained flat on both quarterly and annual bases.
• Land availability is a major concern, with 79% of respondents indicating it was either 'limited' or 'very limited' in Q3, up from 70% in Q2.
• Planning delays are cited as the most challenging factor by 25% of survey respondents.
• Supply chain issues and rising material costs are the top challenges for 61% of housebuilders, with 70% of larger firms (building over 100 units annually) citing this as their biggest issue, compared to 44% of SMEs.
• House price inflation (at 9.9% annually) is helping to offset rising build costs for 54% of respondents.

Main Points

1. Land Price Movements

• Greenfield land saw the strongest growth, with a 5.5% quarterly rise and a 14.7% annual increase.
• Brownfield land experienced more modest growth, at 2.5% quarterly and 3% annually.
• Prime Central London (PCL) land prices remained stable, though travel constraints are affecting demand.

2. Supply Constraints

• Land availability is a critical issue, with nearly 80% of respondents reporting limited supply.
• Planning delays are exacerbating the problem, especially due to environmental impact requirements and affordable housing mandates.

3. Cost Pressures

• Supply chain disruptions and material cost increases are the main cost pressures for 61% of housebuilders.
• Labour costs and land prices are also significant concerns, particularly for SMEs.

4. Housing Demand

• Resilient housing demand is supporting land prices, even as build costs rise.
• Housing Associations and Build to Rent sectors are actively participating in the land market.

5. Policy and Market Outlook

• Help to Buy alternatives like Deposit Unlock are gaining traction, with Nationwide supporting the scheme.
• The Bank of England is expected to raise interest rates, potentially leading to one increase this year and three in 2022.
• Planning reforms remain a key area of uncertainty, with Michael Gove replacing Robert Jenrick in September, raising questions about the future of planning policies.

Impact on the Sector

• Land shortages are expected to have the greatest impact on the housebuilding sector in Q4, followed by planning reforms and policy uncertainty.
• Rising build costs are becoming a major challenge, but house price inflation is helping to mitigate some of these pressures.
• The UK government has announced plans to use brownfield sites to build 160,000 homes, which could help alleviate the land supply issue.

Summary of Challenges

Key Takeaways

• The land market is showing resilience despite rising build costs, driven by strong housing demand and limited supply.
• SMEs are more affected by land prices and labour costs, while larger housebuilders face greater supply chain disruptions.
• Planning reforms and policy uncertainty are significant risks, with planning delays being a major operational challenge.
• Help to Buy alternatives and interest rate changes are key factors to watch in the coming months.

Additional Information

• The Residential Development Land Index is rebased to 100 = Sep 2011 for Greenfield land and 100 = Dec 2014 for Urban Brownfield land.
• The survey included over 50 SME and volume housebuilders based in the UK.
• Knight Frank Research provides insights and reports on the residential development land market at knightfrank.com/research.

Contact

• Justin Gaze, Head of Residential Development Land:
  +44 20 7861 5407
  justin.gaze@knightfrank.com

• Anna Ward, Senior Research Analyst:
  +44 20 3861 6991
  anna.ward@knightfrank.com