The construction and property development sector is set for a robust recovery in 2025 following a challenging 2024, marked by three consecutive years of decline.
Despite a challenging period with decreased dwelling starts and reduced lending, Rangewell, a specialist lending expert, reports early signs of revival. The forecast suggests a significant rebound in 2025, with specialist lenders showing increased appetite and higher loan-to-value ratios.
Rangewell’s analysis indicates that while the sector has faced economic headwinds, leading to selective lending, there is growing optimism. Outstanding lending in construction fell by 7.2% in 2023 and 4.0% in 2022, with a projected further drop of 5.2% in 2024 before a rebound in early 2025.
The decline in lending has impacted dwelling starts, with 162,350 new dwellings recorded in 2023-24, down 19.8% from the previous year. This follows a 2.6% drop in 2022/23. Rangewell anticipates a 2.9% market size decline in 2024, reversing the growth trend in 2022 and 2023.
However, the outlook is improving. The Bank of England’s interest rate cut to 5% in August, with another expected in November, should reduce financing costs. This is likely to stimulate commercial interest and boost residential construction demand.
Additionally, the new Labour government’s ambitious housing targets—including a 1.5 million home goal and potential green belt reclassifications—signals a positive shift. Rangewell has noted increased lending appetite in the latter half of the year.
Alasdair McPherson, head of partnerships at Rangewell, remarked: “The construction and property development sector is emerging from a challenging period marked by economic uncertainty. We anticipate a contraction in 2024 due to current trends, but confidence is returning. Lending conditions are improving, and with expected interest rate cuts, we foresee a strong uplift in 2025. Developers with strong projects are already receiving better lending terms.”
Data Tables and Sources
- *Market size: IbisWorld
- Dwelling starts: Gov UK, StatsWales, Gov.Scot, Finance Northern Ireland
- Lending: Bank of England
- Forecasts: Rangewell