A resilient market has survived 2025. What’s next for 2026?

Putting 2024 in the rearview mirror brought about a degree of optimism for the year ahead, with the familiar mantra of ‘survive to 2025’ ringing – if you made it to this year, then the grass on the other side was greener. While there have continued to be consistent barriers hampering housebuilding and development, the market has been remarkably resilient, and in spite of the egregious economic conditions, we have seen a substantial rise in deal flow and opportunities from developers across residential, PBSA and care. In fact, it has been the best year for deal flow at Atelier yet.

It was clear that the market needed to respond more effectively to the needs of developers, to help get spades in the ground. We’ve answered the call – launching higher Day One advances to make equity work harder and travel further. This has corresponded with a re-crafting of our financial model as part of our ‘Better Day One Funding’ initiative, shortening the equity gap and enabling developers to get projects off the ground far more quickly. 

Time is ticking
It’s a recurring source of frustration in the market – time kills deals, and this year developers have sought finance at a much earlier point in the procurement process, and combined with longer lead times for professional reports, and regulatory lag, there has been an impact on transaction times. 

On average, transactions times have doubled. A pipeline at the end of 2025 now needs to be twice as strong to achieve the same result, and even if deals move slowly, the market keeps its fast pace. Lender appetite, developers’ propensity for risk, and valuations are all subject to variance, and while deals are at risk of floundering, this ultimately can lead to a messy and unwieldy market for financing. 

The confidence question
For all the clamour and speculation in the runup to the Autumn Budget, its greatest impact may have been the cloud of uncertainty it cast over Q3 and Q4 in 2025. Developers and buyers alike were left in-limbo, waiting for clarity from the Chancellor, and this contributed to a considerable slowdown for deals and the housing market. As the dust settles, the early signs are positive, and the optimism and impetus to kick off transaction activity has started to return. Yet the question still remains to what extent buyers will return in 2026 to stimulate the demand side of the market.

To this end, we have seen a series of big-ticket policy changes from the Government. These have been well-intentioned, and appropriate praise must be apportioned for keeping housing on the political agenda, but as yet we have not seen the impact of these lofty promises on the ground. 

From our point of view, a more radical approach is still needed from policymakers to clear the way for developers. The onus of regulations, planning delays and all manner of additional costs is simply too severe, and hinders projects getting off the ground – hardly ‘build, baby, build’. 

Work to be done
As a start, a reduction in affordable housing quotas, Community Infrastructure Levies and Section 106 requirements are all fixes that could free up developers on the ground, without being transfixed on policy solutions years in the making. 

At Atelier, we have long been lobbying that the planning process must be expedited, yet still environmental regulations and local authority approval delays risk driving up costs. The Government’s target of 1.5million new homes will not be achieved on promises alone, and the developers central to that target need greater support to make ambitions a reality. Even now, there are a vast number of sites with planning approvals being held up by regulatory hurdles and viability concerns. 

Loan positions
You have to look back before you look forward in this market, because there is no doubt that every lender who has materially contributed to this market over the last few years will be tussling with some difficult positions in their loan portfolio.  This is not only a distraction for lenders, it is creating a fiscal drag, which will inevitably feed its way through to credit policy and appetite.  Further, developers with sites that have got into trouble, that is yet another SME property developer likely to be out of the market, at a time when SME develop numbers are in sharp decline.  The only upside to this is that we may see mores sites coming to market, as developers and lenders look to exit difficult positions and whilst that may be difficult for some, these distressed sites will become next year’s opportunities.

SME developers should consider how well placed they are to source and execute these opportunities, because as the saying goes, with real estate, you make your money on the way in. 

Cause for optimism
It is not all a matter of despondency, and we have already identified sectors of huge potential and growth over the next 12 months. 

With an ageing population, the care sector needs to ramp up development to meet demand, especially as care bed supply has only grown by 2.9% over the last decade. Meanwhile, the over-65 population has grown by around 20% over the same period. There is a clear deficit, and developers need to step in, with planning reforms needed in place to accommodate this growth. 

In fact, care homes are shutting down at a faster rate than they are being opened, as a consequence of regulatory pressure. The country is set to endure a projected 200,000 bed shortfall by 2050, and there is significant market opportunity to bring about care development in 2026. 

PBSA is also an area set for breakout positive activity in the next year. The Gen One sites of the past are now in need of extensive refurbishment to bring them in line with modern PBSA standards, and providers are therefore likely to look for refinancing. 

But neither of these sectors exist in a vacuum, nor does any asset class, and the strength of later living or PBSA as a market inevitably depends on the strength of residential assets. For a successful and comprehensive property market, we need to see significant transactional activity and confidence permeating sector-wide. 

Looking ahead
Looking back on this time last year, the optimism surrounding 2025 has not necessarily come to pass, as the market has coughed and spluttered through a seemingly never-ending period of uncertainty.  However, PBSA, care and in particular residential development sites are beginning to look more affordable, as are house prices in many parts of the country.  Interest rates continue to fall and mortgages continue to get cheaper, meaning that affordability continues to improve.  So, in considering the most plausible outcomes for 2026, something of a ‘sugar rush’ in the development space isn’t that fanciful.

We wish you a very positive 2026.