Real estate remains one of the most strategically important sectors for the UK. Not only does it shape housing and infrastructure, but also investment flows, regional growth and long-term economic competitiveness. Following the Autumn Budget, we asked Lord Philip Hammond, former Chancellor, for his perspective on what the announcements mean for developers, investors and property owners.
His view: the Budget offers a measure of stability, at the price of a higher tax burden, even if significant structural challenges remain.
In this blog, we look at Lord Hammond’s insights on what the Autumn Budget means for UK real estate and development. For a wider view of the UK economy, you can read our main analysis here, and for his thoughts on hospitality and retail, you can read our sector-focused blog here.
Interest rate stability provides a foundation for confidence
One of the more positive aspects Lord Hammond highlighted was the Chancellor’s decision to rebuild fiscal buffers. In his view, this should support greater stability in fiscal policy, which in turn, should allow interest rates to fall further, a critical factor for real estate financing, construction planning and asset valuations.
“The Budget will be slightly positive for the property sector, as demonstrated by housebuilders’ share prices, based primarily on an expectation that the Bank of England will now feel able to make further interest rate cuts”.
Greater fiscal predictability and lower interest rates allow for:
- more reliable appraisal modelling, with financing costs and assumptions easier to forecast
- greater visibility over exit values, helping developers assess timing, pricing and risk with confidence
- stronger conviction in staging and phasing, reducing the need for large contingencies or delays
- a more supportive lending environment, as stable rates give lenders clearer risk parameters and improve overall affordability
This kind of stability benefits owners, operators and investors, enabling better decision-making and more efficient capital deployment across the sector.
High-value residential: new annual surcharge to factor into viability
The introduction of the High Value Council Tax Surcharge, an annual levy on homes valued above £2 million from April 2028, creates a new cost consideration for the prime residential market. While this affects fewer than 1% of properties nationwide, it is particularly relevant for luxury developments and high-end postcodes, where buyers may reassess ongoing ownership costs. This could influence absorption rates and pricing dynamics for top-tier schemes.
For developers and investors focused on the premium segment, this reinforces the importance of:
- robust demand and buyer-profile analysis, especially for schemes targeting overseas or discretionary purchasers
- realistic pricing strategies that factor in the new annual surcharge and potential sentiment shifts
- enhanced amenities and design, ensuring value remains compelling relative to total cost of ownership
Mid-market residential is largely unaffected, with demand fundamentals continuing to drive activity.
A continued absence of planning reform
Despite calls from the industry, the Budget announced no major movement on planning reform, something Lord Hammond believes continues to hold back development capacity and productivity.
Planning constraints remain one of the most significant barriers for SME developers, affecting:
- project timelines
- site viability
- capital efficiency
- regional housing supply
Without change, developers will need to continue building strategies that assume long lead times and higher pre-development risk.
Sector outlook: selective opportunities across sub-markets
While structural constraints remain, there are areas where opportunity is emerging for well-capitalised operators:
Residential (mid-market & suburban)
Stable rates improve developer confidence, and demand fundamentals remain strong.
Hospitality & leisure property
Operators face higher labour costs, but strong concepts with proven unit economics still attract investment.
Office and mixed-use
Success depends on location quality, ESG alignment and amenity-led repositioning.
Investors are becoming increasingly selective, favouring experienced sponsors, granular delivery planning and clear tenant demand.
What developers and investors should prioritise now
- Strengthen capital discipline
Model financing scenarios around small rate fluctuations, even within a stable environment.
- Reassess site viability under updated tax and wage conditions
Especially for hospitality-anchored schemes and mixed-use developments.
- Factor in elongated planning timelines
Build flexibility into programme and cashflow forecasts.
- Double down on ESG and operational performance
Assets that are efficient, future-proofed and energy-conscious will outperform as operating costs rise.
- Partner with lenders who understand the sector
Real estate remains fundamentally viable but requires a lender that can evaluate risk with nuance and support developers through market transitions.
At OakNorth, we partner with experienced developers, owners and investors through bespoke property finance and business banking designed around the nuances of each project. Even in a selective market, well-prepared schemes with strong fundamentals continue to secure funding. By providing certainty, speed and sector expertise, we help real estate businesses move forward confidently and position themselves to benefit when market conditions improve.
This article reflects the views shared in our recent conversation with Lord Philip Hammond. The content is provided for general information only and does not constitute and should not be relied upon as financial, tax or investment advice.
