BLOGS

The growth story has stalled — and developers know it

The post-pandemic house price surge that defined 2021 and 2022 is a distant memory. According to ONS House Price Index data, UK average house prices in early 2026 are broadly flat year-on-year in nominal terms, and firmly negative once adjusted for inflation. After a period of sharp correction through 2023 and a tepid, uneven recovery across 2024 and 2025, the market has found an uncomfortable equilibrium — one that is squeezing the economics of new residential development to breaking point.

Rightmove's monthly asking price trackers and Zoopla's demand indices have both pointed to a market where buyers remain cautious, mortgage affordability is still stretched despite gradual Bank of England rate cuts, and the gap between vendor expectations and what buyers will pay is proving stubborn. For housebuilders, that gap is not an abstraction: it directly compresses the gross development value (GDV) on which every scheme is underwritten.

Build-out rates slow as reservation numbers disappoint

The listed housebuilders — Barratt Developments, Taylor Wimpey, Persimmon, and Berkeley Group among them — have each signalled in recent trading updates a deliberate pullback in new scheme starts. Completions across the sector are running materially below their peaks, and forward reservation rates, a closely watched leading indicator of pipeline health, have failed to recover to the levels seen before Help to Buy was withdrawn in March 2023.

Help to Buy was, for over a decade, the demand engine that allowed developers to price new-build stock at a premium to the second-hand market and still find buyers at pace. Its removal exposed a structural gap in first-time buyer purchasing power that higher interest rates have done little to help close. Average UK mortgage rates on two-year fixed deals, which peaked above 6% in 2023, have fallen but remain well above the sub-2% environment that underpinned development appraisals written just a few years ago.

REalyse data across major English cities shows that the premium commanded by new-build properties over comparable resale stock has compressed significantly in many districts. Where developers once priced with confidence at 15–25% above equivalent second-hand values, those premiums are now routinely challenged by buyers who have more choice and less urgency. In some regional markets — parts of the East Midlands, the North West, and outer London — new-build asking prices are being cut or schemes are being held back entirely rather than launched into a thin market.

Land renegotiations reshape the viability equation

The most direct response to margin compression is happening quietly at the land stage, well before a planning application is ever filed. Developers are renegotiating option agreements, reducing unconditional land bids, and walking away from sites where the numbers no longer work at current build costs and achievable sales values.

Land values in volume housing markets have fallen meaningfully from their 2022 peaks. Savills and Knight Frank residential development research has tracked double-digit percentage falls in greenfield and urban extension land values across England, with some markets seeing declines of 20–30% from peak. Yet even at lower land prices, viability remains a challenge: build cost inflation — driven by labour shortages, materials pricing, and increasingly demanding energy efficiency standards under Part L of the Building Regulations — has offset much of the land value correction.

Section 106 and Community Infrastructure Levy (CIL) obligations add a further layer of complexity. Local planning authorities, under pressure to deliver affordable housing targets, have been reluctant to reduce affordable housing percentages even where developers argue viability is impaired. The result is a growing backlog of consented sites that are technically implementable but commercially stalled — what the industry calls "paper permissions."

REalyse planning data suggests a significant volume of residential consents granted across English local authorities in 2022–2024 remain unimplemented, concentrated in areas where the gap between consented GDV and current achievable values is widest. This disconnect between planning permissions granted and homes actually built sits at the heart of the government's housing delivery challenge.

Pivoting the product: BTR, affordable, and smaller footprints

Rather than sitting on their hands, the more adaptive developers are reshuffling their product mix toward tenures and typologies where demand is more resilient. Build-to-rent (BTR) has emerged as a genuine growth channel, attracting institutional capital from pension funds and real estate investment managers who take a long-term income view rather than requiring a sale to an end-user at a specific price point.

The private rented sector remains structurally undersupplied relative to demand in most major UK cities. REalyse rental market data shows average asking rents across core BTR markets — London, Manchester, Birmingham, Leeds, Bristol, and Edinburgh — holding firm or rising modestly despite the wider sales market softness. Gross yields on professionally managed BTR assets in regional cities are sitting in the 5–7% range in many submarkets, a level that institutional investors find compelling relative to alternatives.

Alongside BTR, several of the larger volume builders have accelerated their partnerships with Registered Providers (RPs) and local authorities to deliver affordable and shared-ownership stock. While margins on affordable tenures are thinner, the predictability of a forward-funded sale to an RP removes the reservation rate risk that has plagued open-market sales in the current environment. Smaller unit mixes — studios and one-bedroom apartments — are also gaining traction in urban locations, targeting single occupiers and couples priced out of family-sized stock.

The government's 1.5 million homes target: ambition meets reality

The Labour government's commitment to 1.5 million new homes by the end of parliament and its reforms to the National Planning Policy Framework (NPPF) were intended to unblock the supply pipeline. Mandatory housing targets for local authorities, changes to green belt policy through the introduction of the "grey belt" concept, and planning fee reforms have all been positioned as supply-side catalysts.

Yet the delivery machinery — the housebuilding sector itself — is currently running in a lower gear precisely when policy needs it to accelerate. The industry's trade body, the Home Builders Federation (HBF), has warned that without targeted demand-side support for first-time buyers and more pragmatic approaches to affordable housing viability negotiations, the government's headline target will remain out of reach.

Some developers and urban economists argue the structural answer lies in diversifying who builds. Smaller regional housebuilders, self-builders, community land trusts, and modular construction firms could collectively take meaningful market share — but they face the same viability headwinds as the volume builders, often with less balance sheet resilience to absorb them.

Outlook: a market in search of a catalyst

The near-term picture is one of managed retrenchment. Housebuilders are making rational, if uncomfortable, decisions to protect margins and preserve capital through a period of demand uncertainty. Land pipelines are being curated more selectively, build-out rates are calibrated to absorption, and product mix is shifting toward more defensible tenures.

The medium-term recovery thesis rests on a combination of factors: further Bank of England rate cuts feeding through into lower mortgage rates and improved affordability, wage growth outpacing house price inflation to gradually restore purchasing power, and — critically — a more consistent and predictable planning environment giving developers the confidence to commit capital to new schemes.

REalyse data will continue to track where consented pipeline is converting to starts, where land values are finding a floor, and which local markets are showing early signs of renewed buyer confidence. For developers, investors, and lenders navigating this cycle, granular, postcode-level intelligence on achievable values, rental comparables, and planning pipeline is not a nice-to-have — it is the foundation on which viable schemes are built.