A SHARP drop in land values is likely to make Britain’s house-supply crisis even worse, a property association has warned today.
New figures show land values are dropping at their fastest rate since the financial crisis, with developers reducing their spending amid a steep decline in demand for newly built homes.
Prices of greenfield sites fell by 2.2 per cent in the fourth quarter of last year compared with the previous quarter, while urban land fell by 1.6 per cent.
According to data released by Savills this marked the biggest quarterly drop in land values since the second quarter of 2009.
The National Association of Property Buyers, fear the situation is likely to add to the UK’s growing problem with a lack of available homes.
Spokesman Jonathan Rolande said: “Housing supply remains a huge problem in all areas of the UK, and the reluctance of many big companies to build new homes will only make it worse.
“New homes just aren’t selling as easily, and builders are growing increasingly concerned about their margins. January has been brighter than expected, so there may be some recovery in sales in future data. But there’s no doubt that the golden times are over for now.”
Mr Rolande said there were a number of other factors at play which were causing the drop-off.
He continued: ” Wide press coverage about shoddy building work has deterred some buyers. The average new home has 160 defects – 100% more than in 2005.
“We may see a boost thanks to tightening EPC regulation and the cost of fuel – new property is usually much more energy efficient than second hand housing stock.
“Large homebuilders are widely thought to landbank to suppress supply and achieve higher sale prices. If true, we may be about to see this issue become more acute.
“Right now some housebuilders are having to become more flexible with purchasers or even open up new sectors of the market with schemes such as rent to own. Under these schemes, for an agreed period, all rent paid for a new property is ‘returned’ to the occupier to provide them with a sufficient deposit to purchase it. Time will tell if this helps encourage more people to the market.”
In recent weeks, some of the main players in the sector, including Taylor Wimpey, Persimmon and Vistry, have said that they have hit the pause button on buying land or have become more selective. It marks a sharp reversal from recent years, when most housebuilders snapped up as much land as they could to keep up with exceptional demand from would-be buyers.
The number of residential home sales fell by three per cent in December, although transactions remained slightly above pre-pandemic levels.
Residential transactions fell to 108,960 last month, which agents said reflected the uncertainty surrounding the economy and higher mortgage rates.
The expectation is that transactions will fall even further in the months to come, with mortgage approvals having dropped by 30 per cent in November compared with pre-pandemic levels.
