In the strategic land market, we have seen significant activity in the wake of the proposed changes to the National Planning Policy Framework (NPPF). Numerous Council’s across the country will be required to demonstrate increased housing supply should the changes to the Standard Method be adopted, as expected. Rural districts will generally see significant increases in required housing supply, such as South Oxfordshire increasing by over 50%, while certain urban areas such as parts of London and Coventry will see requirements halved.
With this in mind, alongside the opening up of the grey belt for development, landholdings previously considered speculative are being closely examined for residential development. We have seen increased activity across the strategic sector, with particular interest in grey belt land and on greenfield land where there is an anticipated shortfall of local housing supply following the Standard Method changes.
Despite the increased activity and positive market sentiment, the pathway to planning approval remains a significant hurdle. Within the HBF’s recent Housing Pipeline Report (September 2024), it was reported that the number of housing projects granted planning permission up to Q2 2024 was 9% down on last year and the total number of units approved fell by 12%. This sets planning approvals for new homes at the lowest level for a decade. As such, the proposed reforms to the planning system set out by the Labour Government, while welcome, must be implemented correctly to tackle the key issues including the notoriously under-resourced Local Authority planning departments. The lack of sites with planning permission coming through the system has led to significant competition for these sites, particularly across the Arc where we anticipate this to remain the case in the short term.
The October 2024 budget was less impactful on the Real Estate market than some anticipated. Perhaps the most notable announcement related to increased Stamp Duty Land Tax (SDLT) for those either buying second homes or buy-to-let (BTL) properties, or being purchased by companies and other non-natural persons.
The impact of the increase in Capital Gains Tax for landowners making disposals of significant value will be felt and could put off some landowners from considering bringing their land forward in this tax environment if they have the luxury of being able to wait.
Overall, we are anticipating a positive land market in 2025. The new Government has been vocal in their ambition to significantly increase housebuilding up to 300,000 new homes per year; housebuilders are showing renewed activity and appetite for land; and build and labour costs have shown signs of stabilising throughout 2024 (with less than 1 in 5 housebuilders considering either cost a major constraint on development in 2024 in the HBF sentiment survey). As such, if the new homes sales market continues to recover (supported by a more affordable mortgage market and, perhaps, Labour’s pledged Freedom to Buy scheme), the market is aligned for an active 2025.
