Research sees ‘positive signs’ in West Midlands land market

According to research from Savills, which has offices in Telford and Birmingham, land pipelines of the major housebuilders have remained strong over the past two years – currently 15 per cent larger than the 2015-2019 pre-pandemic average – despite the mix of rising borrowing costs along with the end of Help to Buy seeing the land market, at a broader level, slow in quarter four of 2022.

The return to higher levels of buying activity in the land market is, research suggests, likely to depend on the pace of the recovery of transactions in residential market.

Early indicators from the start of 2023 present a mixed picture. Bank of England Money and Credit data reveals mortgage approvals in January were at their lowest level since 2011. However, there was an increase in starts on new plots for in January and February.

Andrew Galloway, director and joint head of development at Savills in Birmingham, said: “Generally speaking, the residential development land market has changed completely in the last year, from a highly competitive market to a much more steady, and selective one, with some developers stating that they have no short term requirement to add to their pipeline.

“While there is a lack of housing sites in general across the Midlands, we feel that we are going to see real appetite for sites between 50-150 units as housebuilders seek to open more outlets as a hedge against slower output from each sale location.

"We expect activity to return in the summer if the more positive sales rates which we have started to see in the first quarter of this year can be maintained, but a full recovery will likely only come in 2024.

"However, other developers such as Housing Associations and student housing providers, who are not reliant on open market sales, will see the quieter market presenting opportunity to build their pipelines with less competition.”

Despite a reduced appetite for land from some developers, Savills is reporting a stronger requirement of sites from housing associations, which were unable to compete in the stronger market of the last two years.

According to the 2022 Inside Housing Survey of the 50 largest housing associations, the sector has the ambition to deliver 233,370 new homes by 2027, in line with the target reported in 2021. But so far, housing associations have only secured the land to build 46 per cent of this pipeline.

Savills latest research also reveals a strong appetite for sites from providers of Purpose Built Student Accommodation (PBSA).