As the year has progressed, those expectations have become more nuanced. Persistent inflationary pressures, stronger GDP growth, volatility in energy markets, and a more cautious Bank of England have combined to create a market that is stabilising, but still some way from recovery.
Macroeconomics, Interest Rates and Demand
Geopolitical uncertainty, particularly the conflict in Iran, has added further complexity. Rising wholesale gas prices have led Ofgem to confirm a 13% increase in the energy price cap for July to September 2026. While still below the peaks seen in 2022, there is an increasing risk that inflation will drift higher again later this year.
This has fed directly into monetary policy. The Bank of England held the Bank Rate at 3.75% in June, signalling a more cautious approach to rate cuts. Mortgage markets reflect this shift: sub-4.5% products remain available, but the downward trajectory has paused.
Affordability therefore remains stretched. While mortgage approvals rose to 65,900 in April, the highest level since January 2025, this appears to have been partly driven by demand being brought forward. House prices have remained broadly stable, with modest annual growth of 0.5% to 1.5%, while buyer demand remains subdued rather than absent, with RICS enquiries holding at -34% in May. Overall, the housing market is showing resilience, but not momentum.
Land Market
These demand-side conditions are feeding directly into land market performance, which has seen a mixed start to the year and is becoming increasingly polarised by region, product type and site quality. Prime sites in strong economic centres continue to attract competitive bidding and stable pricing. In contrast, secondary locations are seeing more significant value adjustments as bidder numbers fall.
Greenfield land values were widely reported to have fallen by up to 1% during the first part of 2026. In the South East, East and South West, weaker affordability and slower sales rates are driving caution and downward pressure on values. A defining feature of the current market is the growing divergence between PLC housebuilders and SMEs, driven largely by affordability constraints. Many SMEs are pivoting towards more affordable markets and are increasingly considering contracting roles.
Developers, in general, are prioritising risk mitigation and cash flow, which is reshaping land-buying behaviour. Preference is growing for 'oven-ready' sites, with an increasing number of bids being made subject to reserved matters approval. Deferred payment structures continue to be a key consideration, while PLCs are targeting smaller sites to reduce upfront exposure. Finally, in response to these challenges, there has been an increase in parcel sales between housebuilders to support outlet numbers.
Outlook
Looking ahead, land demand will remain closely tied to sales rates, affordability and broader market confidence.
The affordable housing sector should provide some counter-cyclical support, with new funding allocations expected to stimulate land buying and provide alternative routes to market.
At the same time, viability pressures will persist. The HBF report published in May 2026 found that the average cost of development per plot has increased by £76,000. This is due to a combination of rising material costs and increased policy requirements, including the Future Homes Standard, the Building Safety Levy and Biodiversity Net Gain (BNG).
Consequently, against the backdrop of a flat sales market, land values remain under increasing pressure, which will continue to create challenges for transactions and deal negotiations.
More recently, the resignation of Prime Minister Keir Starmer in June 2026 has introduced a further layer of uncertainty at a sensitive point in the cycle. A change in leadership and a potential shift in policy direction could have material implications for the residential sector, particularly in relation to Registered Provider funding, the future of Help to Buy-style demand support, and wider housing delivery policy. While the immediate impact is likely to be a pause in decision-making as the direction of travel becomes clearer, any recalibration of government priorities could influence both confidence and capital allocation across the land market in the months ahead.
