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UK Housebuilders Regain Confidence in Land Market As Outlook Brightens

The UK housing development landscape is showing signs of vitality in early 2024, as housebuilders demonstrate increased confidence and a renewed interest in land acquisition, according to findings from the latest Knight Frank Land Index & Housebuilder Survey.

Recovery and Optimism in the Housing Sector
The first quarter of 2024 has brought a positive shift in the housing market, with nearly half of the housebuilders surveyed by Knight Frank now actively seeking new land opportunities. This marks a significant change from the cautious stance observed throughout 2023. The survey, which encompasses the sentiments of 50 volume and SME housebuilders responsible for around 70,000 homes annually in England, indicates a promising recovery in the development land sector.

According to Knight Frank, almost 40% of respondents have noted an increase in site visits and home reservations in the first quarter, the strongest activity level since late 2022. This surge points to a robust rebound in buyer interest, underpinned by greater market stability this year. Furthermore, 25% of housebuilders reported that the supply of available development land was adequate—a record high that suggests improving conditions for land acquisitions and development pipelines.

Stable Land Prices and Build-to-Rent Investments
The survey also revealed a positive outlook for land prices, with 65% of respondents anticipating stability despite rising demand. This stable pricing environment is encouraging more housebuilders to engage in the build-to-rent sector, with 50% of participants either having already sold or planning to sell units into this lucrative market, up from 40% in the previous quarter.

Charlie Hart, Head of Development Land at Knight Frank, emphasized the dual nature of the current landscape: “In Q1 we have seen more confidence enter the housing market after a period of strain from elevated interest rates and economic uncertainty. While it’s important to highlight the positives, it’s equally as essential to highlight the challenges our clients continually face.” He noted that ongoing policy reforms, particularly around planning and infrastructure investment, are crucial for boosting long-term investor confidence.

Challenges and Political Preferences Ahead of the Election
Despite the optimistic indicators, several challenges continue to impede development progress. A third of the survey respondents highlighted major issues with the National Grid’s power capacity, affecting the delivery of approximately 15,000 new homes due to delays from utility firms in providing necessary connections.

With a general election on the horizon, the survey also touched on the political preferences of housebuilders and developers, revealing that 80% would prefer a Labour government in the forthcoming election—a notable increase from 70% in the previous quarter. This preference stems from frustrations with current policies that are viewed as obstacles to housing delivery, particularly in London, where developers face unrealistic affordable housing targets and significant delays in the GLA planning system.

Anna Ward, from Knight Frank Residential Research, summarised the sentiment: “Sentiment has shifted, with sales rates, reservations, and start volumes all ticking up. There has been a notable increase in new sites coming to market, so transactions should build later this year, and as our survey demonstrates, a single rate cut would be enough to entice more housebuilders to buy land.”

As the market continues to evolve, the outlook for UK housebuilders looks increasingly optimistic, though the sector remains cautious about the need for supportive policies to fully capitalize on the current momentum.