If you're an SME property developer, you're probably sick and tired of everyone telling you how unbelievably difficult things have been from the comfort of the sidelines, so to try and rebalance things a little here, in this week's blog, we are bucking the trend, and we are calling 2026 a year that will be defined by selective opportunity. Demand is stabilising from a low base, planning reform is inching forward, and specialist lenders across the board are back in growth mode. There will be challenges, skills shortages, input costs, and committee delays, but when you drill down on the data, as we always try to do, the picture may be changing.
Mortgage activity, the best near-term indicator of housing transactions, has increased through the middle of 2025. The Bank of England recorded 63,000 mortgage approvals for house purchase in May 2025, the first monthly rise since December 2024, hinting at a gradual shift in buyer intent. On completions and starts, the most recent UK-wide official dataset shows permanent dwelling starts and completions rising through Q2 2025, with the next ONS update due in November 2025. We expect regional divergence to persist, with London's pipeline of new starts falling sharply in 2024–25, indicating a weaker 2026 supply in the capital compared to stronger Eastern and South-Eastern markets. However, looking at the market as a whole, things are generally heading in the right direction.
The annual net housing supply in England decreased by 6% to 221,070 in 2023/24; however, it is essential to consider that completions typically lag behind sentiment by 12 to 24 months. For 2026, the lower base should support pricing in undersupplied sub-markets, especially where family homes and mid-market schemes are dominant. We all know the media trend is to attach yesterday's data to tomorrow's outcomes, when in reality, most of what's reported has already happened.
Zooming out with our macro lens, construction activity remained in contraction territory late-2025: the S&P Global Construction PMI rose to 46.2 in September (below the 50 growth/no-growth line). Translation: workloads are improving at the margin, but the industry hasn't flipped to broad-based expansion, so SME developers who can keep sites moving will benefit from less competition and more attention from contractors and valuers.
The planning pipeline is loosening, but unevenly. As of autumn 2024, English planning authorities had 108,900 live applications on hand, down 14% year-on-year; the stock of "applications on hand" was still 44% above quarterly decisions, meaning many LPAs remain underwater and decisions will stay lumpy across 2026. Research cited in the press in October 2025 shows that permissions on sites with fewer than 150 units have fallen; however, policy is moving slowly in our favour. The National Planning Policy Framework was updated in February 2025, alongside ongoing implementation of the Levelling-up and Regeneration Act 2023 (LURA). Expect more secondary legislation and guidance in 2026, including measures aimed at enhancing transparency and expediting the determination and discharge of conditions. The government has also consulted on reforms to accelerate build-out and improve accountability. So what does that mean in layperson's terms? It means the cogs of government take time to move, but they are indeed moving; it's not just rhetoric to see out the parliament.
Perhaps one of the looming issues of 2026, that we are not blind to, is the skills shortage, The Federation of Master Builders' State of Trade research piece shows the bottleneck hasn't disappeared: 61% of firms report skills shortages, 49% experience job delays, and 23% have had to cancel work, figures that persisted into 2025. That implies 2026 build programmes still need a generous float and early subcontractor engagement. However, materials inflation has cooled from the 2021–23 spikes, but kit lead times and availability for specific trades (such as carpenters, roofers, and plumbers) continue to drive programme risk.
Perhaps the goal here will be to de-risk the project timelines, rather than the budgets, and that’s where our team of experts and Development Directors excel in working with clients on an individual basis during the early planning stages of projects. 2026 shows as much promise as it does challenge, and Invest&Fund will continue to be at the centre of it, assisting our clients, even if we are guilty of making our year-end predictions pre-Halloween! In this fast-moving world, we will likely revisit some of our projections later in the quarter.
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