Priya Harley, Director of Debt Finance 

With Q2 2025 well underway, UK residential developers find themselves at an inflection point. While the challenges around viability, planning, and policy remain very real, improving macroeconomic conditions and fresh investment in the sector are beginning to tip the scales toward cautious optimism. 

A market regaining momentum 

The last six months have brought some welcome shifts. Falling mortgage rates, combined with strong wage growth, have improved affordability and boosted buyer confidence, leading to increased activity across the residential and build-to-rent (BTR) markets. Demand has been especially resilient from first-time buyers and movers, encouraged by stabilising prices and higher rental costs. 

Looking ahead, the outlook remains encouraging. At OakNorth, we expect market activity to return to pre-pandemic levels in the next six months, supported by steady house prices, easing mortgage costs, and broader economic recovery. 

Delivery delays and adapting to regulatory complexity 

Despite signs of renewed demand, the pace of delivery remains a challenge – particularly for high-risk buildings (HRBs). The introduction of the Building Safety Regulator (BSR) has added complexity to project timelines, with Gateway 2 and 3 approvals now taking up to 12 months. Over two-thirds of Gateway 2 applications are currently being rejected, and capacity constraints are slowing progress. 

While government funding has been allocated to improve the process, many developers are taking a proactive approach – revisiting project phasing, design, and delivery models to mitigate delays and maintain momentum. From a lending perspective, these shifts reinforce the importance of due diligence, robust feasibility planning, and selecting delivery partners equipped to manage emerging regulatory demands. 

Where’s the opportunity? 

It’s not all headwinds. The government’s £2bn boost to the Affordable Homes Programme and a £625m investment in construction training – announced in the March Spring Statement – signal renewed commitment to housing delivery and addressing skills shortages. 

Meanwhile, with buyers expected to remain price-sensitive, developers that can offer well-located, well-designed, and efficiently delivered homes will be best placed to capture demand. Build-to-rent, too, continues to show momentum, underpinned by regional expansion and strong investor appetite. 

At OakNorth, we’re working with residential developers who are adapting with creativity and conviction – reassessing site viability, exploring mixed-use potential, and thinking differently about phasing and tenure. 

For developers willing to embrace this shift, 2025 could be a year of opportunity – on firmer, more sustainable ground. With The International Monetary Fund (IMF) forecasting up to three more base rate cuts this year, and a visibly more pro-development stance from government leaders, the conditions are aligning for a meaningful resurgence in activity. 

We’re always happy to chat with developers navigating similar challenges – you can drop Priya an email at [email protected].