Land Prices: Where Are They Going in 2025?

Land prices are notoriously hard to predict, but several factors are shaping where they may head in 2025.

The wider economy matters because it drives both developer and buyer sentiment. The Autumn 2024 Budget was poorly received, with rises in employers' National Insurance from April creating a gloomy backdrop. On the other hand, interest rates have been falling since their summer 2023 peak, and most forecasters expect the Bank of England rate to drop below 4% this year, with Goldman Sachs predicting 3.25% by mid-2026.

Housebuilding policy is another key influence. The government is targeting 1.5 million new homes by 2029. Its revised National Planning Policy Framework restores mandatory housing targets in England, eases green belt restrictions, promotes grey belt land and promises a nature restoration fund to free up stalled sites. Up to 12 new towns of around 10,000 homes each have also been proposed from a shortlist of 100. In theory this should push land prices up, but recent governments have consistently missed housing targets and earlier eco-town and garden city plans added relatively little supply.

Knight Frank's Residential Development Land Index, based on 50 housebuilders, found greenfield and brownfield values in England were flat in the final quarter of 2024. Optimism has grown since the NPPF, helped by fewer planning delays and lower rates, but there are worries over planning department resources, support for first-time buyers as stamp duty effectively rises in April, and weak demand from cash-strapped housing associations for affordable homes. Some 98% of housebuilders do not expect the government to hit 300,000 homes this year. For Q1 2025, 65% expect flat land prices, 20% a rise and 15% a fall.

Knight Frank's Charlie Hart said reforms such as brownfield passports are promising but will not on their own deliver the boost needed, with viability a major constraint, especially for medium-density urban schemes. Statista expects annual development land value growth to slow to 1.5% by 2026.

Overall, prices are broadly stable for now. Any meaningful rise is likely to depend on government growth and planning policies taking effect and on housebuilders returning to building in volume.

Originally published on The Landsite (17 February 2025)