East of England development land market sees demand for good quality opportunities against continued economic headwinds

According to Savills, activity remains robust, although developers are being selective and maintaining a conservative approach to acquisitions – placing greater emphasis on certainty of delivery, planning status and anticipated sales performance.

While there remains demand for good quality opportunities, particularly strategic greenfield sites in sustainable locations, the market is operating against a backdrop of continued economic and sector-specific headwinds.

Rising build costs, higher finance costs, slower sales rates and increasing regulatory requirements have put pressure on development margins – with greater scrutiny of residential land values and more cautious bidding behaviour from both national and regional housebuilders.

According to Savills research, greenfield values in the East of England have fallen by 2.2% in the last 12 months, while the value of urban sites has dropped by 6.5%. This is very similar to the national picture, which has also seen a 3.3% fall in greenfield values and a 6.6% drop in urban land values.

Richard Shuldham, associate director in the development team at Savills in Norfolk, said: ” Pressures have been evident in negotiations on both immediate development opportunities and strategic land agreements.

“Sites carrying abnormal costs, substantial infrastructure requirements or policy uncertainty are facing the greatest downward pressure on values,” he said: “Viability remains a key challenge, particularly where affordable housing obligations, nutrient neutrality considerations, s106 contributions and highways requirements significantly impact market confidence.

“Across Norwich and the principal Norfolk market towns, there remains competition for sites capable of delivering conventional family housing in volumes aligned with local demand. Developers continue to favour locations with strong transport links, established amenities and proven sales evidence.

“Consented and deliverable sites continue to attract attention, even if pricing is not reaching the levels seen during the peak years of the post-pandemic market. The most immediate challenge remains market absorption. Although house prices have generally held up better than many anticipated, sales rates are still below the levels required to support aggressive land buying.

“Housebuilders are frequently relying on incentives and careful pricing strategies to maintain transaction volumes, which in turn limits their ability to stretch on land values.  The overall market sentiment is just about remaining cautiously positive; however, wider economic uncertainty continues to temper enthusiasm. Looking ahead, there are reasons for measured optimism. Norfolk benefits from strong underlying housing demand, an attractive lifestyle offer and a varied pipeline of allocated sites.

“While developers are unquestionably more cautious than they were three years ago, they remain active buyers where opportunities align with their operational requirements. As borrowing costs look likely to normalise and market confidence shows signs of improving, we would expect transaction volumes to strengthen ahead of any uplift in land values.”

Abigail Jones, who leads the development team for Savills in Cambridge, continued: “The development land market remains active, with a strong pipeline of consented sites due to come to the market over the coming months and sustained demand from major PLC housebuilders, particularly for well-located opportunities.

“Buyer interest is strongest for schemes of 100–300 units with limited infrastructure requirements, reflecting a continued focus on deliverable, high-quality sites. Demand also remains strong in key urban locations where land is scarce, particularly Cambridge, where competition for sites continues to support market activity.

“Sites in attractive locations with strong sales values continue to attract competitive interest, especially where there remains a healthy margin between gross development values and development costs. Hertfordshire and Cambridgeshire continue to perform well in this regard, while Bedfordshire remains a popular location, supported by the opportunities associated with East West Rail. There is also growing evidence of London-based developers seeking opportunities across the Eastern region as they respond to ongoing viability challenges within the capital.

“Competition for development opportunities is being further strengthened by an increasingly diverse purchaser base. In addition to traditional residential developers and housebuilders, hotel operators, care home providers and other alternative-use purchasers are actively pursuing suitable sites, broadening the range of bids being received.

“This wider pool of buyers is increasing competition for opportunities and helping to underpin land values across the region. Despite increased regulatory requirements and higher build costs, the market continues to adapt, with landowners and developers working collaboratively to bring forward viable development opportunities.”