BLOGS

The forecast split that is stalling decisions

For most of the past two years, the house price consensus held firm enough for developers to model schemes with quiet confidence. Not anymore.

Heading into the second half of 2026, major UK lenders and consultancies are publishing outlooks that sit on opposite sides of zero. Some, including forecasters at Halifax and Capital Economics, have revised expectations upward to a modest 1–3% annual gain, pointing to a resilient labour market, constrained housing supply and a Bank of England base rate that has eased — albeit slowly — toward the mid-3% range. Others, including revised scenarios from Savills and Oxford Economics, now put a credible probability on a 2–3% nominal decline by year-end, citing persistent mortgage-rate headwinds, falling consumer confidence and the shock of a June asking-price correction that Rightmove described as the largest monthly drop for that month in 14 years.

For developers, a forecast spread of five percentage points is not noise — it is a land-buying decision, a phasing timeline and a board-level conversation about whether a scheme clears viability.

What the transaction data is already showing

The divergence in forecasts mirrors what has been happening on the ground in completed sales. REalyse transaction data shows average sold prices across all major property types peaked sharply in Q3 2025, then softened through the back half of the year and into 2026.

Detached houses averaged £523,699 in Q3 2025 — the high watermark of the cycle. By Q1 2026 that figure had eased to £469,608, a fall of roughly 10% over two quarters. Flats followed a similar trajectory, declining from £283,091 to £247,881 over the same period. Semi-detached and terraced houses both softened too, with semi-detacheds moving from £322,019 to £305,934 and terraced from £288,400 to £263,060.

On a price-per-square-foot basis, the picture is equally clear. REalyse data shows sold £/sqft for flats running at around £380–£391 in 2026 Q1–Q2, compared with a peak of £439/sqft in Q1 2025 — a 13% compression in just 12 months. For detached houses, the retreat is more measured: from around £363/sqft in Q3 2025 to £349/sqft in Q1 2026, but the direction is unambiguous.

Perhaps the most telling signal for developer confidence is the widening gap between what vendors ask and what buyers will pay. The implied asking-to-sold discount — the difference between average listed price and completed transaction price — has nearly doubled over two years, moving from 1.24% in Q3 2024 to 2.34% in Q2 2026. In absolute terms on a £350,000 property, that gap has grown from around £4,600 to over £8,000. In a market where GDV assumptions drive whether a scheme works, this trend forces developers to stress-test sales values at levels that felt conservative 18 months ago.

The planning pipeline is already contracting

The most concrete evidence that developers are pulling back comes from the supply side. REalyse planning data shows residential C3 planning applications submitted each quarter falling from a peak of 454 in Q3 2025 to just 280 in Q1 2026 — a drop of around 38% in two quarters.

More striking still is what has happened to declared development value. Aggregate scheme values for residential planning submissions fell from £847 million in Q1 2025 to £500 million in Q1 2026, and further to £275 million in Q2 2026. That is a two-thirds decline in declared pipeline value over five quarters, and it reflects a combination of genuinely fewer large schemes coming forward and developers repricing — or withdrawing — proposals that no longer clear revised viability thresholds.

Average value per application tells the same story in miniature: from £2.4 million per scheme in Q1 2025 to under £800,000 by Q2 2026. This compression suggests that the schemes still moving through the planning system are smaller, lower-risk proposals — extensions, conversions, infill — rather than the larger strategic allocations that generate meaningful housing delivery numbers.

What developers are actually doing

Conversations across the industry point to three dominant responses to this environment.

Land bids have been repriced or withdrawn. With GDV assumptions trimmed by 5–10% across many regional markets and build-cost inflation still running ahead of output values in some areas, developers are submitting conditional bids where they would previously have bid unconditionally, and walking away from sites where the residual land value calculation no longer supports the vendor's reserve. REalyse comparable data is being used more actively in viability submissions to planning authorities, giving developers an auditable evidence base for the GDV assumptions they are defending.

Phasing has extended. Rather than forward-selling at scale on schemes with longer build programmes, many developers are revising legal completion schedules, deferring reserved matters applications and renegotiating option durations with landowners. The objective is to maintain optionality while the forecast picture clears — but the consequence is that consented land sits longer before it becomes active site.

Product mix is shifting toward rental. Where schemes face slower sales absorption, developers with the balance sheet to do so are retaining units for private rented sector or build-to-rent disposal, or re-engaging with registered providers and local authorities on affordable housing deals. REalyse yield data shows gross rental yields in many regional city markets sitting in the 5–7% range for well-located flats, providing a floor to investor appetite where owner-occupier demand is softer.

Mortgage rates: easing, but still the constraint

The Bank of England has been cutting since late 2024, but the pace has disappointed borrowers. With the base rate still in the mid-to-high 3% range and lenders' swap-rate pricing keeping the average two- and five-year fixed mortgage above 4.2–4.5%, the affordability constraint that drove the original market correction has not been resolved.

First-time buyers — a critical demand driver for new-build sales — remain stretched. The ratio of average mortgage payments to take-home pay for a typical new borrower at current rates and median prices implies monthly costs that are well above the long-run average for most English regions outside London, where prices have already seen more meaningful correction.

For developers modelling shared ownership or Help-to-Buy successors, the absence of a national equity loan scheme continues to be felt acutely at the entry level of the market. Until either rates fall further or incomes catch up, new-build sales values in the £250,000–£350,000 bracket — the heartland of volume housebuilding — will remain under pressure.

Outlook: data discipline over optimism

The next 6–12 months will test developers' ability to separate sentiment from evidence. The market is not collapsing — transaction volumes remain active, rental demand is robust, and the government's planning reforms are at least directionally supportive of longer-term delivery targets. But the margin for error on individual scheme viability has narrowed considerably.

Developers who move forward with rigorous, postcode-level comparables — tracking live asking prices, recent achieved sales, days on market and rental yield benchmarks — will be better placed than those relying on market-wide headline forecasts that mask substantial local variation. In a cycle where the difference between a viable and a non-viable scheme can come down to a 3–5% shift in exit values, the quality of the underlying data is no longer a back-office function. It is the business case.