2025 is finally here after what was a challenging 12 months for property investors and developers.
This time last year, GDP was flat, inflation was stubbornly sitting at 4%, and the Bank of England’s base rate had flatlined at 5.25% following two Monetary Policy Committee ‘hold’ votes after 15 consecutive rate increases. And with a General Election looming, the political landscape looked uncertain from both a UK and geopolitical perspective.
The outlook for the UK property market was equally lacklustre. According to widespread industry speculation, house prices were anticipated to fall by an average of 2.7% across a range of credible commentators' forecasts, including the OBR, Knight Frank, Savills, JLL, Rightmove, Zoopla, and Capital Economics. This created added uncertainty for developers regarding where—and if—they should build next.
To succeed, developers need to sell their current sites, identify new profitable sites to develop, and have confidence in the market to believe they can crystallise that profit. But, as we all know, these components of the property development cycle have faced challenges—not just in 2024, but for the past few years.
Was 2024 Such a Bad Year?
Believe it or not, no, it wasn’t, because much of the property commentary and macro market forecasts didn’t actually transpire as anticipated.
Looking back at the Bank of England’s MPC report in November 2023, 12-month GDP growth through to 2024 was expected to be marginally positive. Meanwhile, Q4 2024 inflation was reportedly anticipated to stand at 3.1%, the base rate at 5%+, and unemployment at 4.5%. But looking at all these measures, the economy is actually in a better position today than originally expected.
Furthermore, the latest property market indices are reporting 12-month growth rates of +4.8% (based on the latest figures published by Halifax in November 2024) and +3.7% (Nationwide, November 2024). Interestingly, these results are a long way from the late 2023 forecasts shared by many credible property market commentators.
Property developers need confidence in the stability of house prices to undertake projects, especially under tighter margins. With that confidence, they will build (as long as they can find sites where vendors have realistic, residual-based valuation expectations).
So, Is It Time to Get Building?
Looking back at the macro and property market presentations I’ve made in recent years, I always try to capture the sentiment of the market in the main title. In November 2023, I called it Tough Times. In March 2024, A Glimmer of Hope. In June 2024, A Window of Opportunity. And, most recently, in December 2024, Let’s Get Building, which still fits the current landscape. The titles nicely represent how the market has strengthened and how property professionals, particularly developers, feel.
But is 2025 the year to get building? All of the main indicators are certainly pointing in the right direction—there’s currently stronger demand, constrained supply, and plenty of government support. Collectively, these components can create tangible market opportunities. Already, we’re starting the new year with:
A Stronger-Looking Economic Outlook
Inflation is under control, the MPC projects interest rates to be around 3.7% by the end of the year, unemployment is at a five-decade low, and we’re seeing real wage growth—i.e., pay rising at a higher rate than inflation.
Continued House Price Growth
The outlook for the next 12 months is certainly far more positive than last year—mortgage rates are easing, and price growth is currently forecast at an average of 3.3% across our range of commentators, compared to -2.7% this time last year. All things considered, the general consensus is that prices are well-balanced. Inflation-adjusted property prices currently sit at the same levels as 2003 amidst strengthening demand expectations.
This view is supported by Zoopla’s UK House Price Over-/Under-Valuation Index, which places current levels as ‘balanced’ and forecasts a move to ‘under-valued’ under 2.5% growth forecasts over the next 2-3 years.
With more transactions freeing up developers’ equity for their next projects, less uncertainty around input costs, and a more confident exit market, housebuilding is once again seeing tailwinds. These are further boosted by the government’s housebuilding stimulus.
For developers, especially small and medium-sized developers, there’s a real opportunity to get building. The market offers an infinite supply of development opportunities for 1, 2, 5, 10, or 20 homes at sites that are uneconomic for volume housebuilders to pursue.
However, despite the opportunities, challenges still exist, making the pathway to stacking deals far from straightforward. Yet, with the right insight, it is possible to carve out a clear pathway to success, starting with the best practice guidance I’ve shared below.
My Top Seven Tips for Developers Moving into the 2025 Market
Do: Have the confidence to get building—but still be selective about the sites you choose to take on, and make sure your decisions are underpinned by achievable economics. Developments invariably involve considerable effort and numerous contingent elements. Remember, there must be a worthwhile reward at the end of it all.
Don’t: Settle for anything less than great sites—not all vendors’ expectations are based on what can be paid for sites (always work from residual-based valuations when bidding). This means the better you are at finding great site opportunities, the more options you will have to trade off against each other. In turn, this will enable you to make better, more informed decisions about which sites to progress. We can help you validate the economics of sites, prioritise which sites to develop, and give you the focus to close the best transactions.
Do: Focus on the long term—as mentioned above, while there has been no real (inflation-adjusted) house price growth since 2003, nominal price growth of 100%+ during that time has meant that long-term asset holders have made considerable money. Irrespective of the lack of real (inflation-adjusted) growth, if a property is purchased for £100,000 with a £75,000 mortgage, and the nominal house price growth of the last 20 years has inflated that figure to £200,000, your equity investment is now worth 5x. Wherever possible, keep more of the properties you develop to generate long-term, slow wealth.
Don’t: Forget to be more strategic—as a former strategy consultant, I am surprised at how tactical the property investor/developer market can be. Property development is a business, and you should therefore think extremely carefully about the market in which you operate; the customers you serve; the competition you face; and the capabilities you have to do business within your chosen geography/segment. How can you excel, create competitive advantages, and generate greater profitability? Incorporating more business strategy thinking into your property business will benefit you in the short, medium, and long term.
Do: Think about scaling your activities—this is also a key business strategy consideration. While many of the components that make up developments may be bespoke to individual sites, they are consistent in terms of the resources that are required, especially people and partners. If you want to scale your business, it needs to become more efficient and easier each time. Get this right, and you can successfully balance developing two concurrently running sites, when before it may have been just one. And then, before you know it, two becomes four, and so on. Focus on building your team and service providers around you to work together again and again, so that you can all achieve greater efficiencies and success together.
Don’t: Overlook the importance of procurement—costs have been extremely volatile over the last few years, with raw materials and building contract quotations varying hugely in price. Whatever your operating model (in-house vs. contracted-out works), make it your business to delve into the detail of your costs—to validate that they are correct and to identify hidden opportunities to cut them and make more profit. This is where you have the most control over the profitability of a site. Developing and/or recruiting professional procurement skills can add significant value in this area.
Do: Build well—last but by no means least, build with strong ESG (environmental, social, and governance) considerations. While these can drive costs, owner-occupier buyers, investors, and tenants are increasingly valuing ESG credentials, especially the very tangible cost savings of operating the asset (e.g., energy efficiency). More and more, they are also valuing wider credentials such as the sustainability of building materials, ethical supply chains, inclusive designs, community engagement, and certification standards. These factors help your development stand out, attract greater competition for buyers, and ultimately achieve higher GDVs. For example, the CrowdProperty ESG Project of the Year built 18 affordable housing units on the Isle of Arran, which attracted additional funding from the Scottish Government and was snapped up by a Housing Association in a single transaction, making for a quick and efficient exit.
CrowdProperty’s ESG Project of the Year: An 18 Unit, £3.35m Affordable Housing Development on the Isle of Arran
CrowdProperty’s Project of the Year nominee, The Printworks, Bradford,137 Units £15.6m GDV
- CrowdProperty’s Project of the Year Winner, Solihull, West Midlands, 8 Units, £2.3m GDV
Let’s Get Building
I’m excited about what 2025 has to offer. Property development is fundamentally important to the economy and to housing, and there’s a burning platform of demand ready and waiting to be taken advantage of. With the right outlook and approach, small and medium-sized developers can play a pivotal role in transforming these opportunities into much-needed properties and spearheading the UK housebuilding sector’s efforts to get building again.
Together We Build
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With 300+ years of property expertise within the team, the company’s distinct ‘property finance by property people’ proposition means it understands what developers are looking for to help them succeed.
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