The UK's property market has hit a new low as development land values plummet, with greenfield and urban sites both experiencing declines in the second quarter of 2026. Savills reports that greenfield land values fell by 1.2% during the quarter, contributing to an annual drop of 3.3%, while urban land values dropped by 2.1%, leaving them 6.6% lower than a year ago.
The South East region was hit hardest, with a 2.2% quarterly decline in greenfield values, followed closely by the rest of the UK's regions, which have been impacted by elevated mortgage costs and economic uncertainty. Housebuilders are adopting a cautious approach to land acquisition, opting for smaller sites that can deliver between 75 and 200 homes rather than larger developments.
Prioritising risk management has become a key strategy for developers in this challenging market environment. Savills notes that deferred payment terms and conditional contracts are increasingly being used to mitigate planning and development risks. Patrick Eve, head of regional development at Savills, highlights the growing trend towards joint ventures and straightforward sites with clear development potential.
The cost of building a new home has risen by an estimated £76,000 over the past five years, due to increased labour and material costs, as well as regulatory demands. This has led to construction cost inflation outpacing house price growth since 2021, exacerbating the viability challenges faced by housebuilders.
However, a glimmer of hope has emerged in the form of renewed activity from registered providers, who have re-entered the land market following the launch of the Social and Affordable Homes Programme. This initiative is driving demand for 'oven-ready' affordable housing sites that can deliver homes by 2029.