There has been a notable increase in the number of housebuilders re-entering the land market, according to new research by Savills.

The study found that the major housebuilders are generally the most active players for smaller sites, with those under 150 units attracting the most interest, although activity inside the M25 has increased at a slower pace.

The report goes on to say that the increase in activity has in most regions yet to translate to values this quarter. UK greenfield and urban values dropped marginally by 0.1% and 0.3% in Q3 2020.

More new sites are coming to market increasing the supply of land after the inevitable pause in the market due to the Covid-19 lockdown. According to the report, a net balance of 65% of Savills development teams reported that this was the case in September, increasing from 29% in June and -75% in April.

The need to make up for the lack of land buying since March has driven competition for sites which has sustained values in many markets.

In some regions, values have been pushed up to exceed even pre-Covid-19 levels, led by gains in the South West.

Land values in London remain relatively stable, the report found, with no significant change in values over the lockdown period.

In the six months to September 2020, land values in central London fell marginally by 1.6% and in outer London remained at the same level as March.

Lydia McLaren, Savills research analyst, said: “The difference in performance in central and outer London reflects changes in house prices. Whereas there has been slight growth in average house prices across the capital [4.5%] according to Nationwide, house prices in prime London have fallen 1% over the last six months.”

Unconditional sites or those for sale subject to planning, with opportunities for value add and ready to start building in two years are currently in the highest demand in London.

Smaller oven ready sites of up to 40 units attract smaller developers and contractors who do not have large pipelines and buy land on a site by site basis. Whereas larger sites are receiving interest from build to rent operators and developers if the forward funding model works.

Housebuilders are being selective with sites in London, with a greater focus on outer London zones and only more proactively bidding for sites where they have a particular gap in their pipeline to fill. There are also more sites coming forward in prime zone 1 locations than compared to previous periods.

According to Savills, Covid-19 has tempered sector appetite for risk, although there has been a sector focus on investing in existing stock to meet building safety standards in the short term and net zero carbon standards in the longer term.