"Despite challenges, developers have shown remarkable agility, adapting their strategies to remain robust and profitable in a tough environment"
- Terry Woodley - Shawbrook
Nearly all UK property developers have modified their strategies in recent months, driven by rising concerns over house price volatility, according to new research from Shawbrook.
In the past quarter, house price movement has overtaken other issues as the leading concern among developers. Combined with a range of economic and operational pressures, this is prompting substantial changes in how residential projects are planned and delivered across the country.
The data reveals that 23% of developers now identify house price growth as their primary challenge. Close behind are difficulties with obtaining planning permission (22%), the impact of the cost of living on potential buyers (21%), and environmental, social, and governance (ESG) demands (21%). Other major worries include accessing skilled labour (20%), high mortgage rates (19%), material cost inflation (18%), and a lack of government support for first-time buyers (18%).
These cumulative pressures have led to strategic reassessments across the industry, with 99% of developers reporting adjustments to their business models. The most common response has been changing the type of properties they develop, cited by 35% of respondents. This points to a shift in the scale or specification of new housing to better align with current market demand and constraints.
Additional strategic changes include:
Re-evaluating locations: 33% are reconsidering the geographical areas they target
Anticipating higher costs: 30% expect significant increases in operating expenses
Altering construction methods: 27% are looking into alternative techniques or materials
Delaying project starts: 27% are postponing the initiation of new developments
Considering market exit: 25% report they may need to cease trading
Developers are also preparing for considerable cost hikes. Around 30% expect their costs to rise by 35% over the next 12 months. Meanwhile, 33% forecast increases of 21–30%, and 27% anticipate rises between 31–40%. A further 16% expect a 41–50% increase, while 12% project costs will climb by as much as 51–60%.
“Rising costs, planning hurdles and market uncertainty have created a perfect storm which has been exacerbated by fluctuating house prices,” said Terry Woodley, managing director of development finance at Shawbrook. “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.”
