The UK development land market slowed in the second quarter of 2026, as weak sales rates, ongoing viability pressures and broader economic uncertainty continued to weigh on activity.
Greenfield values decreased by -1.2% this quarter, bringing annual falls to -3.3%. The South East saw the sharpest fall in greenfield values, at -2.2%, while the North and Scotland were the only regions to record value growth, both at +0.3%.
Urban land values fell by -2.1% this quarter, bringing UK annual falls to -6.6%. Greater viability challenges have resulted in urban land values falling at a faster rate than greenfield sites.
Higher mortgage costs and reduced confidence in both the housing market and wider economy have led to a lack of improvement in sales rates or buyer demand in this quarter.
This is also translating to a cautious market for developers, who are focusing on managing risk. Deferred payment terms and conditional contracts are increasingly being used by land buyers to offset the risks associated with planning and development.
This desire to manage risk is also evident in the types of sites attracting the strongest demand. Bids have remained relatively strong for 75–200 unit schemes, but appetite for larger sites has diminished across the country as developers seek to reduce exposure to infrastructure requirements that add length and complexity to the development process.
Viability remains a key challenge for housebuilders, particularly in the least affordable markets. The cost of building a new home has increased by £76,000 over the last five years, driven by material and labour cost inflation, as well as new and emerging regulatory costs, according to Home Builders Federation.
Growth in construction costs has outpaced house price growth since 2021, but viability concerns have become more pronounced over the last quarter as the inflationary impact of the conflict in the Middle East has become apparent. Consequently, Savills land agent sentiment survey has dropped from +26 in Q1 to -18 in Q2.
More encouragingly, BCIS forecasts that build cost inflation will ease from the current 3.2% per year to around 2.0% by the end of 2026. However, this will need to be matched by a period of steady house price growth to improve viability.
Registered providers (RPs) have returned to the land market, helping to support activity during a period of wider market challenges. The launch of Social and Affordable Homes Programme (SAHP) has offered the largest boost to grant-funded affordable housing investment in a generation and has introduced a renewed level of confidence among RPs.
The programme prioritises sites that can deliver by 2029, resulting in competitive bids from RPs for oven-ready sites in primary locations.
While demand remains muted, activity has also been constrained by the limited number of sites brought to market over the past year, particularly in the North.
In England, however, the effects of the 2024 NPPF changes are beginning to come through, with much of the South and Midlands reporting an increase in sites coming forward. A more positive approach through the appeal system also suggests that the flow of consented land could improve over the medium to long term.
This picture varies across the UK, as Scotland and Wales are not seeing the same improvement, with both facing a notable lack of greenfield sites being brought forward.
Strategic land remains in demand across the country. Despite operating under different planning systems, England, Scotland and Wales are all going through a busy period for local plan making, creating opportunities for promoters and developers to secure allocations in emerging plans.
Emily Williams, Director in Savills Research, commented: “At the start of the year, there were hopes that interest rate cuts would help ease the cost of debt and support buyer demand. With sales rates still under pressure, build costs remaining elevated and wider economic uncertainty weighing on confidence, developers are becoming increasingly selective about the sites they pursue.”
Patrick Eve, Head of Regional Development at Savills, adds: “Developers are adapting to a more challenging market by focusing on risk management. Deferred payment terms, conditional contracts and joint ventures are becoming more common, while appetite remains strongest for sites that offer a clearer route to delivery.
There are some positive signs ahead, with lower oil prices improving the outlook for inflation and potentially supporting an easing in the cost of debt later in the year, which would help mortgage affordability, development finance and appetite for land. However, UK economic and political stability will also be key to rebuilding confidence across the market.”
