The UK’s development land market experienced a slow end to 2025 – a trend expected to continue into the early part of this year. However, the outlook is more optimistic, with stronger levels of transactional activity and potential for value growth expected to return to the market, according to the latest report by Savills.
Urban land values saw the sharpest declines, with a fall of -1.7% in Q4, bringing annual change to -4.5%. Greenfield values also softened, with the most significant fall of -1.2% in Q4, bringing annual change to -1.4%.
In the South, urban land values fell -4.4% in Q4 contributing to an annual change of -5.2%. There was also a decline in greenfield values to -3.4% in Q4, bringing an annual change of -4%.
The subdued end to the year was in part due to uncertainty surrounding the Autumn Budget and speculation around potential policy changes, which either slowed down land transactions or accelerated them at lower price points. Landowners were required to take a view when selling land in Q4, with possible changes to Capital Gains Tax, in some cases, influencing decision making. These pressures were compounded by weaker housing market conditions, as slowing sales rates and very limited house price inflation reduced appetite for land.
Low new homes sales rates continue to cause issues
The average new homes sales rates reached 0.61 per outlet per week in the year to June 2025. Evidence from Savills’ development teams and comments from housebuilders suggest rates of sale softened over the second half of the year, albeit with some regional variation, with robust activity remaining in core housebuilder markets.
As sales rates are a key indicator of market strength, any improvement in economic conditions or buyer sentiment would support the market and benefit housebuilders across the board.
Looking ahead, recent falls in mortgage rates are a positive step towards generating more activity in the market. Further base rate cuts over the course of 2026 will allow mortgage lenders to offer more favourable rates, increasing the pool of prospective buyers and driving transactional activity across the market.
The introduction of a demand-side stimulus, similar to that of Help to Buy, would also improve interest in sales of new homes. However, the absence of such measures in the Autumn budget suggests any support is unlikely to materialise if it does, before Spring of 2026.
Challenges for SME developers
Despite lower sales rates, major housebuilders remain well placed to continue operations, and competition for well-located, high-quality sites is expected to remain strong due to continued restricted supply.
The pressure on SME developers is more acute, and many are left with limited capacity to invest in land. These smaller players are generally delivering homes at a slower pace, and are therefore less well equipped to invest in new opportunities. Certain areas across the UK are reliant on these builders, and new home delivery has slowed down considerably in these markets.
Hamish Simmie, associate director in Savills Research, comments: “Demand for land will be influenced by the strength of the new build market, with housebuilders carefully gauging market sentiment. For smaller developers, who face greater challenges, increasing their activity in the market is critical.
“We may see a pickup in activity from Housing Associations once funding from the new Social and Affordable Homes Program is allocated. As well, appetite for strategic sites is expected to remain robust, as developers look to take advantage of opportunities created by the revised NPPF in England and emerging local plans under NPF4 in Scotland.”
Jonny Kiddle, head of South Coast Development at Savills, adds: “I am feeling more positive about the development land market than I was for the majority of 2025. There are indications of a rise in submitted planning applications across England which in turn will lead to an increase in land supply. Coupled with this are the prospect of lower mortgage rates and even potentially a Government backed buyer incentive. This all should lead to a stronger development land market.”