Leverage is being reduced and gross development values (GDVs) are being squeezed so there is less capital available for developers, according to the Q1 2019 Market Bulletin released by Avamore Capital.
The research revealed that this may potentially impact the number of developments taking place in the next few months.
On the other hand, the increased loan term is compensating for longer build and sales periods.
Developers are accounting for a potential slowdown in construction and activity until the impacts of Brexit become clear. Furthermore, developers are including extra time to secure sales within the extended cycle.
For developers currently working on projects which are nearing completion, it is becoming increasingly popular to consider rental as an exit strategy rather than sales.
As a direct response, the research showed that more lenders are offering a buy-to-let product to help support the rising demand.
Rise in regional activity
The report added that while most developers are treading with caution, those that have unlocked opportunities in the regions are expected to perform well.
With businesses increasingly opening offices in regional cities that offer more attractive living prospects, development activity remains robust in these areas.
Last year saw some developers moving totally away from London. Throughout 2018, house prices in the regions grew in comparison to London where they fell and this trend is expected to continue into 2019.
The report revealed that companies are increasingly looking to cities such as Glasgow, Manchester and Birmingham to house their headquarters and the continuous improvement of UK transport links is making regional moves a more viable option than ever before.