The UK property sector had its strongest start to the year since 2005 in January with house prices, land values, and activity levels exceeding expectations driven by high demand and constrained supply. Urban, greenfield, and brownfield sites are attracting significant capital with initiatives like the government levelling-up fund incentivising the transformation of underutilised land assets into vibrant residential and commercial spaces.
Annual house price growth rose to 11.2 per cent, according to data from the Nationwide Building Society Housing Index with the sixth consecutive monthly increase to £255,556 value on average in January. The London housing market is being buoyed by international property buyers and investors with flats appreciating owing to the re-opening of offices as well as return of international and domestic students.
The residential land market remains exceptionally buoyant with demand for development land propelling historically high activity levels. First time buyers for instance, who are increasingly priced out of the UK capital, prefer homes close to work and friends. Consequently, the FTB segment is demonstrating a strong appetite for homes in commuter zones. UK greenfield and urban land values increased as a result by 2 per cent and 1.7 per cent, respectively, in Q4, representing annual growth of 8.8 per cent and 6.8 per cent.
Meanwhile, the £1.5bn Brownfield Fund announced by the chancellor at the last Budget in October, alongside the £4.8 billion Levelling Up Fund, are set to stimulate significant regeneration and deliver new housing, health and education and leisure facilities, roads and railways across the UK. This is vital given 1.5 million sales in 2021 – the highest number of transactions in any year since before the financial crisis, according to Knight Frank – eroding existing supply.
Despite house building cost inflation, competition for land sites is set to maintain high levels given the scope of opportunity in the property sector. As industrial, logistics, and residential investors vie for scarce land resources, this will serve as a driver of house price growth going forward.
“Average demand for London apartments at the highest level since April 2020. The average value of a flat in London has remained largely unchanged over the last 12 months, while the average price of a semi-detached house has risen by 6%, signaling value in the flats market.”