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The UK property development market is rarely predictable. After a turbulent few years, 2024 offered a degree of relief, with two interest rate cuts from the Bank of England (BoE), helping to ease financial pressures and fostering growth in the property sector. But as we navigate through January 2025, the property development landscape has once again shifted – presenting both challenges and opportunities for developers.

Inflation may be slowing, and borrowing conditions are improving, but these factors alone don’t guarantee smooth project delivery. If there’s one thing developers need in the current market, it’s flexibility—both in funding and in their ability to adapt to changing conditions.

2024 vs. 2025: The Changing Reality for Developers

Last year, many developers were cautiously optimistic. Interest rate reductions created breathing room, and for some, projects that had stalled due to financial constraints were able to move forward. But despite this, fundamental challenges remain in 2025:

  • Planning system delays continue to stall developments: local authority bottlenecks remain a huge issue, with even straightforward applications taking longer than ever
  • Build costs are unpredictable: while material prices have stabilised somewhat, labour shortages and contractor pressures highlight the need for adaptable budgeting
  • Buyer demand is shifting: higher mortgage rates have changed affordability for homebuyers, and developers need to be agile in responding to what the market wants

Yet, one of the biggest challenges developers are facing currently isn’t market conditions—it’s access to finance.

January 2025: Navigating the Challenges

In theory, lower interest rates should have made borrowing easier. In reality, however, funding conditions this month have been far from straightforward. Many high street banks remain reluctant to lend at pre-pandemic levels, while some alternative lenders have pulled back, re-evaluating their risk appetite in the face of ongoing market uncertainty. The challenges in obtaining finance have been particularly pronounced for small and medium-sized enterprise (SME) housebuilders. According to the Home Builders Federation’s latest State of Play survey, 32% of SMEs that build 1-10 homes a year said access to development finance was a major barrier to growth, compared to 14% of those that build over 100 homes a year.

Developers are encountering a range of funding challenges, including:

  • More restrictive lending criteria: many lenders have tightened their affordability and viability assessments, making it harder to get projects funded – especially for those with non-standard schemes or larger borrowing requirements
  • Delays in decision-making: some developers have faced significant delays in getting funding approved, holding up progress at a time when speed is critical
  • Limited appetite for new lending: some lenders have reduced their loan books, leaving developers scrambling for new sources of funding

For developers, this means one thing: a rigid, inflexible lender could stall or even derail a project.

Why Flexibility in Development Finance Matters Now More Than Ever

Property development is never a straight line from start to finish. Unexpected issues arise, whether that’s a delay in securing planning, a contractor going under, or a shift in exit strategy due to changing market conditions. Lenders who offer rigid, one-size-fits-all products will struggle to meet the needs of today’s developers.

A flexible finance partner can make all the difference. That means:

  • Funding structures that adapt to real-world challenges: developers need lenders who can adjust terms when unexpected delays occur, rather than penalising them for circumstances beyond their control
  • Speed in decision-making: delays in funding can be just as damaging as delays on-site. A lender who moves quickly can keep projects on track
  • A pragmatic approach to exit strategies: market conditions in 2025 will continue to evolve, and developers need finance partners who can support refinements to sales or rental strategies as required

2025: A Year for Agile, Strategic Development

Despite the challenges, 2025 presents significant opportunities for developers who can adapt. Housing demand remains strong, but the key to success will be working with partners – whether that’s lenders, planners, or contractors – who understand the sector’s realities and can respond accordingly.

Rigid financial structures belong to a past market. In today’s climate, development finance needs to be as dynamic as the sector itself.

How Magnet Capital Stands Apart

For developers, these uncertainties make one thing clear: funding alone isn’t enough – it’s about having the right type of funding. Having a lender who understands the challenges of the sector and can offer pragmatic, adaptable finance is essential.

At Magnet Capital, we’ve always positioned ourselves as a partner, not just a lender. Our team work alongside developers every day, giving us insight into the challenges on the ground, adjusting funding structures, repayment terms, and even exit strategies to keep projects moving forward.

You’re not dealing with an algorithm or a tick-box underwriting process – we move quickly because we understand time is money and delays in funding can kill momentum on a project.

As developers look ahead to the coming months, those who prioritise flexibility – both in their project approach and their funding – will be best placed to succeed.

For more information on how Magnet Capital can help fund your next development project, contact us on 020 8075 3255 or hello@magnetcapital.co.uk.

Magnet Capital

Author Magnet Capital

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