What can UKREiiF tell us about the state of the UK development finance market? – Fraser

Developers, funders and investors were all broadly in agreement that there was plenty of capital and opportunity in the market. However, uncertainty appears to remain a significant stumbling block.

This uncertainty is having a knock-on impact for decisions across the market. Borrowers are becoming increasingly cautious when committing to new schemes and are seeking greater assurance from funders around how projects will be supported through slower sales periods and extended run-off timelines. Set against this, the word ‘uncertainty’ is becoming increasingly important. However, while it has become somewhat of a buzzword for many lenders, more evidence is now needed. Developers want to know, in practical terms, how a lender supports the project if the programme moves and the market takes longer to clear completed units. The days of assuming a straightforward exit are behind us, and flexibility is becoming a more important part of the lending proposition.

Another recurring theme at UKREiiF was the lack of a meaningful replacement for Help to Buy, and the view that an equity-based support scheme could lift confidence, particularly for apartments. There remains a widely held view that an equity-based support scheme, particularly for apartments, would provide a significant boost to confidence across the market. Developers would gain greater certainty around buyer demand, while lenders would have increased confidence in sales absorption and could potentially take a more constructive view on leverage. Many felt that a targeted intervention of this nature could unlock stalled schemes and accelerate housing delivery.

Another major concern was the continued impact of the Building Safety Act and the Gateway process. While many developers have successfully navigated Gateway 2, significant uncertainty remains around Gateway 3 sign-off and the time frames involved once construction is complete. The lack of visibility around approvals creates a difficult scenario whereby a fully built asset can remain effectively trapped, generating holding costs while awaiting final certification. That uncertainty inevitably feeds back into development appraisals, lender appetite and overall market confidence.

Local authority charging and taxation was another practical pressure raised by developers, including cases where charges were applied before schemes were fully completed or handed over. Several developers highlighted instances where business rates and other charges were being applied before schemes were fully completed or handed over, creating additional financial pressure at precisely the point where projects are most exposed to delays and cost overruns.

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Outlook remains positive

Despite these challenges, the mood at UKREiiF was far from pessimistic. Even in the face of uncertainty, markets still continue to function, capital remains available and experienced developers are still progressing schemes. The government’s bold housing delivery targets are also creating significant opportunities, with a concerted effort from all sides to help solve the housing crisis and deliver new homes for future generations. However, to really deliver against this target, there needs to be a concerted effort to reduce friction and uncertainty across the development lifecycle, both of which would undoubtedly accelerate delivery and investment.

If confidence is the missing ingredient, funding partners can help by making uncertainty more manageable. That starts with clarity on process and decisioning, and with terms that remain dependable when conditions shift. The wider point for the market is that developers need partners who stay close to the scheme and can respond with judgement as the build and exit picture evolves. This also needs to focus on developers of all sizes. While much of the conversation has centred around national housebuilders, SME housebuilders also represent a significant opportunity to unlock housing on smaller infill and brownfield sites. Therefore, policy must focus on this group as well, unlocking smaller sites quickly and delivering community-focused housing.