Ten weeks into the UK’s lockdown, with slightly more clarity around the Pandemic’s impact on development and the wider residential market is starting to emerge from its stagnation. The Nationwide house price index recorded 3.4% price growth in April and Halifax recorded 2.7% annual growth. However, these values reflect sales that exchanged contracts before the lockdown began.

In the latter half of March, sentiment fell sharply; the RICS sentiment survey showed the biggest one-month fall in new buyer enquiries and sales instructions. As these measures are falling in tandem, it suggested no substantial change in the relative balance of supply and demand. However, it does point to a sharp fall in transactions, which were 11% below their five-year average in Q1 this year and 17% below average in March.

Although now easing, the lockdown measures mean we should expect to see similar figures for May and a new report on residential development by Savills estimates that annual transactions will be around 620,000 in 2020, half of what it had forecast in November 2019.

“We anticipate average values could fall up to -10% over the course of 2020, off a small number of transactions. At present, there is little activity in the development land market, and its recovery will be linked to sentiment in the wider housing market and housebuilders’ ability to resume construction. There are indicators that suggest longer-term optimism; there remains significant appetite for strategic sites and construction recommenced on around 100,000 homes across England and Wales in the first two weeks in May”, the firm said.

A pause in the land market
As the land market is based on longer time horizons, the effects of the lockdown have not been as abrupt as they have been on construction. The latest land index shows land values remaining relatively flat, with UK greenfield land values growing marginally by 0.3% in Q1.