UK residential development land values held steady in the final quarter of 2025, as subdued buyer demand, elevated mortgage rates and ongoing planning constraints continued to weigh on activity.
According to analysis from Knight Frank, uncertainty ahead of the November Budget and limited grant funding for registered providers kept developers cautious through much of Q4. Appetite for new sites remained constrained, with many landowners reluctant to transact at current pricing levels.
However, sentiment has begun to shift. Government borrowing costs stabilised following the Budget, paving the way for mortgage rates to ease in January. The Bank of England has indicated fiscal measures announced in November are likely to see inflation undershoot earlier forecasts, potentially supporting further rate reductions this year.
BOTTOM OF THE CYCLE
Oliver Knight, head of UK residential development research at Knight Frank, says Q4 is widely viewed as the bottom of the current cycle, with tentative signs of renewed land appetite emerging in December and January.
Suburban and rural markets have proved more resilient than major cities. The Government’s “grey belt” policy is providing clarity on redevelopment opportunities in lower-quality Green Belt locations, unlocking interest in previously stalled sites.
London remains more challenged. Data from Molior shows 2,300 private homes were started in the capital in Q4, up from 986 in Q3, but still well below historic levels. Annual private starts have fallen 84% over the past decade, from 33,782 in 2015 to 5,547 last year, against a housing target of 88,000 homes.
SELECTIVE OPPORTUNITIES
Policy reforms are also beginning to ease bottlenecks. The Building Safety Regulator has reduced legacy new-build cases from 81 in November to 29 by the end of January, while average decision times have fallen from 37 weeks to 13.
Knight Frank’s latest housebuilder survey shows 57% of developers reported a decline in site visits and reservations in Q4, yet nearly 30% expect reservations to rise in Q1 and more than half plan to increase starts.
While pricing appears to have stabilised, a sustained recovery will depend on further mortgage rate easing and meaningful planning reform. If those conditions align, early 2026 could present selective opportunities to secure land at attractive values.
