Land Prices – Where Are They Going in 2025?

Posted by The Landsite on 17th February 2025 -

Land prices are historically unpredictable, but at the moment there are a number of factors at play which could affect the price of this commodity going forward.

With that in mind, let’s consider where land prices may be heading in 2025.

The direction of the broader economy is a major factor behind land prices as it affects developer and homebuyer sentiment alike. The Autumn Budget at the end of 2024 was broadly not well received. The Employer’s National Insurance rises which kick in this April, and their potential impact on employment, set a particularly gloomy tone. The direction of interest rates also offers some hope for the market. Since peaking in summer 2023, the bank rate is now very firmly trending downwards. Most forecasters are suggesting that the Bank of England will cut interest rates to below 4% this year. Goldman Sachs are more optimistic, forecasting the rate will drop to 3.25% by mid-2026.

New housebuilding is a key driver of land values, and the government’s plans to build more housing at scale are significant – and ambitious. They have targeted the building of 1.5m new homes by 2029. At the end of 2024, as part of its Plan for Change, the government set out plans to streamline the planning system and make new housebuilding easier. The revised National Planning Policy Framework (NPPF) reinstates mandatory housing targets in England with sizable increases in some areas (but decreases in others), the easing of greenbelt restrictions and the promotion of so-called grey belt. A ‘nature restoration fund’ is promised to help release sites that have been held up by ecological and water neutrality policies.

More recently the government have proposed building up to 12 new towns, from a shortlist of 100, each with a potential capacity of 10,000 properties. Keir Starmer says these will be achieved by “sweeping aside the blockers”.

In theory these policies should generate massive demand for housebuilding land and cause prices to surge. However, no government in recent times has managed to meet housebuilding targets. Plans for ‘eco towns’ and ‘garden cities’ by various governments dating back almost 20 years have not contributed that much to supply.

Knight Frank’s Residential Development Land Index tracks the quarterly performance of residential land values across England. It takes in opinion from 50 volume and SME housebuilders building around 70,000 homes annually. Knight Frank’s report says that the average value of both greenfield and brownfield land in England was unchanged over the final three months of 2024. It says that this was due to a combination of economic, market and policy factors.

Brownfield Land - The Property Developers' Dream or Nightmare?

The reports says that, since publication of the NPPF last year, optimism in the land market has grown due to the proposed planning reforms. It adds that a reduction in planning delays and falling interest rates have benefitted developer activity. However, it says that there are concerns over planning department resourcing and a lack of support for first time buyers – especially as Stamp Duty effectively rises this April.

 The report points out that a major challenge in increasing housing supply is the lack of demand from housing associations for the affordable homes developers are required to build. This is due to the financial constraints on these associations. It says that almost all (98%) of housebuilders do not believe the government will meet its annual target of 300,000 homes this year.

 On future land prices, Knight Frank says 65% of the 50 respondents expect land pricing to remain flat in the first quarter of 2025. Fifteen percent predict a fall while 20% expect an increase. This was similar to forecasts made the previous quarter. The report opens by saying: ‘England land values [are] flat amid economic challenges and cautious developer activity, with little expectation of significant movement in the near term.’

 Charlie Hart, Head of Development Land at Knight Frank, comments: “While the government's policy reforms show promise, particularly the brownfield passports initiative, these changes alone won’t be enough to deliver the substantial boost in housing numbers we need. Viability remains a key constraint throughout 2025, particularly for medium density urban development. Driving delivery in our cities is key to addressing the target aspirations.”

 He continues: “That said, we're seeing encouraging signs in the land market following the National Planning Policy Framework's publication. Local authorities are taking a more proactive approach to site assessments and housing allocations. However, to truly unlock development potential, we need a coordinated approach that addresses both planning efficiency and the financial constraints facing housing associations.”

 In contrast, a recent report by data and business intelligence platform Statista comments: ‘With the housing market cooling down, it can be expected that land values will also be affected. It is expected that by 2026, the annual development land value growth rate will decrease to 1.5 percent.’

 In summary, as to where land prices are heading in the rest of 2025, it is true to say that both positive and negative factors are at play in the market.

Prices are relatively stable at the moment. But if there is to be any appreciable increase it will at the very least need government growth and planning policies to take effect, and for housebuilders to put spades in the ground in volume again.

Interested in reading related articles?

Q&A with Brickflow - Solving the UK's Housing Shortage

What Are The Advantages of Buying Property and Land at Auction?

Do You Own a Potential Development Site?