As the broader economic situation becomes more volatile, you could be forgiven for thinking that a crisis in the UK housing market is now inevitable; media speculation seems to have already set the scene for a price dip akin to the equity shock of the years post the 2008 financial crisis, and this fear has certainly been reflected in the markets. This may happen, or this may not, but in this week's blog, we are unpacking some of the ongoing challenges in the sector, first with some despondency but finishing strong with some sanguine conclusions.

On the surface, house prices are cooling but stable. Still, property broker Knight Frank has been the first significant name out of the traps to foresee a double-digit percentage downturn in the coming 18-24mths and many others are now following suit with equally bearish outlooks. So will it be as simple as a recession now has to be triggered through consistent rate rises to curb inflation? Time will tell, but that is seemingly the popular narrative.

Suppose you take a cross-section of the UK's publicly traded homebuilders; the year-to-date figures make a difficult read; as investors foresaw the difficult circumstances ahead, many of these businesses' share prices are now down 30%-50%, with Barratt Homes at the time of writing down 54% for the year. This is unsurprising; as well as a reported decline in buyers reserving new homes, the sector is still coming off the back of dealing with the four horsemen of the pandemic, labour shortages, withdrawn packages of support, materials shortages, and stricter regulations.

So that all sounds pretty terrible right? Well, it is, and it isn't. Many currently see the housing construction sector as an undervalued opportunity, and for ample reason, fundamentally, people need homes to live in, and we need to build more. The government fully understands that it must stimulate the development market somehow - it's an essential sector for society to function.

The government is already floating some of these ideas; redevelopment investment zones and changes to simplify planning regulations have both been touted as ways to provide immediate support. Previously Liz Truss said to the Sunday Telegraph, "The best way to generate economic growth is bottom up, by creating those incentives for investment through the tax system, simplifying regulations." The idea is simple, make it easier and more efficient for property developers to build by cutting the red tape.  This makes sense; you can't solve a shortfall crisis with anything other than bricks in the ground.

In a roundabout way, this is where we come back in; with our focus on servicing the residential development market and our ability to react quickly, we have made the decision to offer locked-in interest rates at the point of drawdown, and that will remain locked in for the duration of the facility. We are now in a situation where rising interest rates are a probability, not a possibility, and this feature protects our borrowers from exposure to these incremental cost increases. We understand that hitting a moving target is incredibly difficult when costing out your project, so this way, we are playing our small part in simplifying the process and getting those bricks in the ground.

Our Development Finance clients can benefit from facilities up to 70% LTGDV (Up to 80% LTC) frm 6.40% + Bank of England Base Rate & Fees. For a full breakdown of the criteria, please email us at or call us on 01424 717564.