Research reveals property developers' changing approaches as market pressures intensify
Property developers are changing their business approaches in response to fluctuating house prices and a range of market challenges in the UK, according to a new study by specialist lending bank Shawbrook.
The research found that house price volatility has become the leading concern for developers over the past three months. Twenty-three percent of respondents identified house price growth as their main issue, closely followed by difficulties in securing planning permission (22%).
Other significant concerns include the impact of the cost-of-living crisis on buyers (21%), meeting sustainability and ESG requirements (21%), and shortages of skilled labour (20%). High mortgage rates (19%), increasing material costs (18%), and insufficient government support for first-time buyers (18%) were also cited.
Shawbrook reported that nearly all surveyed developers (99%) have revised their business plans in light of these pressures.
The most common adjustment has been changing the type of properties constructed, with 35% of developers taking this step. This points to a shift in the scale or nature of new developments to better align with current market conditions.
Other notable changes include developers reassessing their preferred locations for projects, with 33% reconsidering where they build. Thirty percent expect significant rises in operating costs. Twenty-seven percent are considering alternative construction methods or materials, while another 27% are delaying the start of new projects. One in four developers (25%) indicated they may have to exit the market.
These strategic shifts have implications beyond the development sector. For mortgage brokers, the changes signal potential adjustments in housing supply, property types, and project timelines. Increased costs and ongoing uncertainty may slow the pace of new builds or alter the types of homes entering the market, which could affect available inventory and buyer demand. Brokers may need to prepare for evolving client needs, possible delays in transactions, and shifts in lending criteria as developers adapt to market pressures.
“Our research highlights the challenges currently confronting developers and the wider housebuilding industry in general,” said Terry Woodley (pictured), managing director of development finance at Shawbrook. “Rising costs, planning hurdles and market uncertainty have created a perfect storm which has been exacerbated by fluctuating house prices. However, despite the headwinds of the past 12 months, there’s still plenty of reason for optimism.
“Recent government announcements, such as the Planning & Infrastructure Bill, could help cut red tape and accelerate progress, paving the way for increased housebuilding. Despite challenges, developers have shown remarkable agility, adapting their strategies to remain robust and profitable in a tough environment. One thing is clear: to overcome current barriers and make real inroads towards the government’s housebuilding targets, a collaborative, multi-pronged approach is essential.”
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