Macroeconomic Factors
Several macroeconomic factors have influenced the housing and land market in Q1 2025. The global financial environment remains volatile, with inflationary pressures and interest rate fluctuations impacting affordability. The US tariff announcement has led to a seismic shift in global trade policies and subsequently shocked stock markets across the world, however the extent of the damage this may have on the housing market in the UK is yet to be seen. April saw a slowing of UK house price growth to 3.4%, down from 3.9% in March (Nationwide, April 2025), however the impact caused by the global economic uncertainty in this figure is hard to judge. The growth reduction was not unexpected with Stamp Duty Land Tax (SDLT) changes beginning at the start of April causing a large number of transactions to take place in March.
Strategic Land Market
The strategic land market has become increasingly competitive due to changes in the NPPF. The revised NPPF imposed stricter requirements on Councils to demonstrate increased housing supply, particularly in rural districts. This has led to heightened interest in previously speculative landholdings, primarily related to grey belt and greenfield sites. However, the pathway to planning approval remains challenging. The HBF Housing Pipeline Report (March 2025) indicates a continued decline in planning permissions, with approvals during 2024 down by 10% on the previous year. However, Q4 2024 showed signs of recovery being up 1% on Q4 2023.
Market Sentiment and Values
Market sentiment in Q1 2025 has been cautious. Greenfield land values have remained relatively flat, mirroring trends from 2024. There is optimism in certain sectors, with housebuilders showing renewed activity and appetite for land, both immediate and strategic. The stabilisation of build and labour costs since the peaks of 2022 has been a positive development. Despite this, the overall sentiment is tempered by the challenges in securing planning permissions, the uncertain demand landscape post-Help to Buy and the continued challenges faced in securing purchasers of Section 106 affordable homes.
Impact of Help to Buy Withdrawal
The cessation of the Help to Buy (HtB) scheme has had a significant impact on the housing market. Without this initiative, first-time buyers face higher barriers to entry, struggling to save for substantial deposits amidst rising house prices and slow wage growth. The absence of HtB has led to a decrease in sales rates, with housebuilders reporting lower sales per outlet per week compared to the highs achieved during the scheme. This raises concerns about whether there will be sufficient demand to absorb the increased housing supply projected for 2025 and beyond, and with these concerns comes uncertainty relating to appetite to acquire land benefitting from planning permission for residential development. Read Neil Kelly's recent thought piece on this topic, published in Green Street News.
Looking Forward
The residential land and development market in Q1 2025 was navigating a complex environment shaped by policy changes, economic factors, and shifting demand dynamics. The continued high level of competitiveness demonstrated in the strategic land market, the performance of the wider housing market (crucially first-time buyer demand) and global macroeconomic influences remain the key factors to watch. Whilst there are opportunities for growth, Government needs to address the planning approval challenges and ensure there is sufficient demand to sustain the increased housing supply they are set on enabling. Key to this will be maintaining a flexible and entrepreneurial approach to site disposal, delivery and exit strategies. Despite market uncertainty caused by wider economic headwinds, the land market is set to continue to gain momentum throughout 2025.
