Development land values fell in the second quarter of 2026 as higher mortgage costs, viability pressures and wider economic uncertainty continued to weigh on the market, according to Savills.
Greenfield land values fell by 1.2% during the quarter, taking the annual decline to 3.3%, while urban land values dropped by 2.1%, leaving them 6.6% lower than a year earlier.
Urban sites continued to come under greater pressure than greenfield land because of worsening viability, with the South East recording the largest quarterly fall in greenfield values, down 2.2%. The North and Scotland were the only regions to record growth, with values edging up by 0.3%.
According to Savills, higher mortgage rates and weaker confidence in both the housing market and wider economy have prevented any recovery in sales rates or buyer demand, prompting developers to become increasingly cautious about land acquisitions.
Risk management has become a greater priority, with deferred payment terms and conditional contracts increasingly used to reduce planning and development risk.
Patrick Eve, head of regional development at Savills, said: “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.”
Demand has remained strongest for sites capable of delivering between 75 and 200 homes, while appetite for larger developments has weakened because of the greater infrastructure requirements they typically involve.
Viability remains a major challenge for housebuilders. Citing Home Builders Federation figures, Savills noted that the cost of building a new home has risen by £76,000 over the past five years because of higher labour and material costs, together with new regulatory requirements.
Construction cost inflation has outpaced house price growth since 2021, with the inflationary impact of the conflict in the Middle East adding further pressure during the latest quarter. Savills’ land agent sentiment survey fell from +26 in the first quarter to -18 in the second.
Registered providers have, however, returned to the land market following the launch of the Social and Affordable Homes Programme, supporting demand for ‘oven-ready’ affordable housing sites capable of delivering homes by 2029.
Emily Williams, director in Savills Research, said: “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.”
