Development Finance

In today’s fast-growing market, it can be difficult for property investors to maximise potential. If you’re considering diversifying your portfolio in 2025 – looking beyond the city centres is an opportunity worth seizing.

With rising demand for countryside living and strong returns on investment, rural property projects are becoming an increasingly attractive prospect.

Potential for Significant Growth

 

In fact, rural house prices have outpaced urban areas over the past 5 years . According to data from nationwide, between December 2018 and December 2023 house prices in predominately rural areas increased by 22%, compared with 17% in urban areas.

And experts say this demand will only increase – with rural house prices predicted to rise a further 4% this year.

With potential for such significant growth, it’s no wonder rural opportunities are becoming a popular choice among property developers. At Magnet Capital, we’ve certainly noticed an increase in enquiries for rural projects – funding for barn conversions, new-builds, and eco-friendly homes has risen steadily, as more developers tap into opportunities presented by the rural property market

We’ve noticed that enquires for barn conversions in particular have increased in recent weeks. This surge in interest is not surprising, as these types of properties can command a premium price, particularly in sought-after locations such as the Cotswolds, Southwest England, and the Lake District.

However, while the finished product can be spectacular, the process of converting an agricultural building into a residential property is anything but simple.

From planning complexities to securing the right funding, barn conversions require patience, and financial backing that is as flexible as the project itself is crucial.

The Barn Conversion Process

 

Unlike new builds, barn conversions are dictated by the constraints of the existing structure. That means developers must work within the limits of planning laws, structural integrity, and heritage considerations.

The process typically involves:

• Planning & Permitted Development Rights (PDR): some agricultural buildings can be converted under Class Q permitted development rights, removing the need for full planning permission. However, local authorities often impose strict conditions, and Article 4 directions can block PDR in certain areas
• Structural Considerations: Barns weren’t built for living. Many structures require substantial modifications to comply with building regulations
• Access Challenges: many barns are in remote locations, meaning mains water, drainage, and electricity may not be readily available
• Maintaining balance: There must be balance between maintaining the original features and integrating modern insulation, heating, and glazing to meet today’s energy efficiency standards

The Key Challenges

 

1. Funding

Barn conversions are inherently unpredictable, which many lenders see as a risk. Unlike traditional new-build developments, conversions don’t fit neatly into standard lending models. This creates barriers for developers looking to secure finance.

2. Planning

Even with PDR, local planning officers can impose strict conditions and there’s no guarantee that approval will  even be granted. Many lenders take a conservative stance, reluctant to finance a project until all planning and structural reports are in place.

3. Costs

Barn conversions often reveal hidden costs mid-build. Traditional lenders rarely accommodate for unforeseen expenses, leaving developers scrambling for additional funds.

4. Exit Strategy

Many high street banks and traditional lenders worry about the resale potential of rural properties, leading to restrictive lending criteria and reduced loan-to-value (LTV) ratios. For developers, this can mean limited borrowing power—even when the project is fundamentally viable.

Support is in the Right Place

 

At Magnet Capital, we understand the intricacies of barn conversions and will work with you to structure your barn conversion loan to align with your project’s needs, even if unexpected costs arise partway through.

For example, we recently funded a development project for a client who wanted to transform a derelict barn in Somerset into a stunning, high-specification rural retreat.

Initially, we provided a loan of £250,000 to support the development. However, midway through the project, the client recognised an opportunity to significantly increase the property’s sale value from circa £850,000, by converting the dormer space in the roof.

Believing in our client’s ambition and the potential value of their project, we worked closely with them to ensure they had the necessary capital to enhance the build and swiftly approved a £200,000 increase in their facility within hours. The client was then able to deliver the project on time and the additional funding enabled the expansion of the living space, significantly boosting the sale value (est. £1.5m).

A Smart Investment

 

For property investors, barn conversions offer a unique blend of character, demand, and profitability. Whether as a high-value resale project, a luxury rental, or an eco-friendly rural retreat, they provide diverse and scalable investment potential.

At Magnet Capital, we’re committed to helping property developers unlock the potential in barn conversions – not just by providing finance, but by being a trusted partner through every stage of the journey.

If you’re considering a barn conversion for your next project, let’s talk: hello@magnetcapital.co.uk or 02080753255.

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.

I recall sitting at my desk in March of last year, with the COVID 19 pandemic’s impact starting to take hold and being told by surveyors and commentators that residential house prices would crash by 20%, possibly more. One mentor of mine, an industry doyen, said this will be like the property crash of 1973 again. As Managing Director of a Development Finance lender, I felt the cold winds of a housing crash, as we decided whether we should change our lending criteria, based on these warnings.

Here we are 18 months later and not a day goes by when I don’t read an article commenting on the surge in house prices. This is corroborated by our experience on the ground, where our borrowers are selling their completed developments in record time, at prices well above the levels we had originally valued the properties at. We are seeing houses selling off-plan or at the very early stages of the build. It is not unusual for there to be multiple offers from buyers, well over the asking price.

Our surveyors report the same is happening in other parts of the country. For example: double digit price rises in Nottingham, properties over £1 million in rural areas seeing 7% rises in the year to March and so on and so forth. Net mortgage borrowing was the highest in March 2021 than in any other month since comparable data began in 1993.

The reasons for this market mania have been well discussed. Low interest rates, a chronic shortage of supply of quality housing and lifestyle changes, where buyers want more space and are prepared to move out of urban areas, have led to increased demand. Then throw in a stamp duty cut, a scheme to support 95 per cent mortgages for first-time buyers and then the human element, whereby the fear of missing out leads to increased prices. It becomes a self-fulfilling prophecy, with the media, estate agents and other parties commenting on the surging house prices and the record highs, which in turn leads to buyers worrying that time is of the essence.

My fears back in March 2020 thankfully have not come true, but I am concerned that the market is now overheated, and we could see a readjustment, next year. We will see the effects of the end of the stamp duty cut, the possible ending of quantitative easing and interest rate increases. My sense is that the euphoria will stop and there will be a pull back. Hopefully, I am wrong, but I always prefer to hope for the best but prepare for the worst.

Sam Howard

Prime Minister Boris Johnson has announced that construction sites will be able to remain open over the course of England’s second national lockdown.

 

Addressing the nation on the 31st October, PM Boris Johnson stated that the construction sector could remain operating throughout the new lockdown, with restrictions in place from the 5^th of November until the 2^nd December. Johnson claimed:

 

“The virus is spreading even faster than the reasonable worst-case scenario of our scientific advisers […] so now is the time to take action because there is no alternative. Workplaces should stay open for where people can’t work from home, for example in the construction and manufacturing sectors.”

 

This clarity on the matter comes as a refreshing change to the sector, after the initial announcement of the March lockdown earlier this year caused confusion with some over whether or not sites should stay open.

 

In addition to the go-ahead from the PM for construction sites to remain open and operating during this lockdown, Johnson also added that the job retention scheme will be extended until December this year. Johnson said:

 

“I’m under no illusions about how difficult this will be for businesses which have already had to endure such hardship this year and I am truly sorry for that. That’s why we are going to extend the furlough system through November […] we will not end it, we will extend furlough until December.”

 

The new restrictions for England’s new lockdown, implemented on the 5^th November and remaining in place until the 2^nd December, require people to remain in their homes unless for certain purposes, to not mix with households other than your own, and for certain businesses and venues to close.

 

Build UK stated the following on the matter:

 

“Construction and manufacturing should stay open across all four nations, which is testament to the industry’s response to the pandemic so far. Sites are advised to review their social distancing measures and remind the workforce of the importance of complying with the Site Operating Procedures ‐ Version 6 whilst on site, as well as the new restrictions off site to protect their family and colleagues.”

“Tradespeople can also continue to work in people’s homes as long as both the worker and household members have no symptoms of coronavirus. The Work Safe Safe Work Guide can be used to reassure householders.”

 

“Hotels can remain open to provide accommodation for workers. We are currently reviewing the implications for construction workers and please let us know if you have difficulty finding accommodation for workers working away from home.”

 

Build UK have also created an authorisation letter template. This template is for employers in construction to use should their workers be stopped when traveling to and from work, anywhere across the UK.

With England’s second national coronavirus lockdown coming into effect this Thursday, the FCA have recently proposed an extension to the mortgage holidays deadline. Under such proposals, borrowers will have until the 31^st January next year (2021) to apply for the payment holiday.

 

The scheme was set to end last Saturday, however, with the FCA’s new proposal, borrowers could now be provided with a little more leeway in light of the current situation, and the new measures due to be implemented.

 

According to UK Finance, some 2.5 million borrowers have opted for a mortgage payment break since the pandemic first begun.

 

Last week, a Joseph Rowntree Foundation study found 1.6 million households were concerned about their mortgage payments for the next three months. This new extension to the mortgage holiday scheme could be a welcome relief for some, providing support for borrowers who are financially struggling due to the coronavirus pandemic.

 

The FCA’s Proposal

 

On Monday the 2^nd of November, the FCA proposed to extend the payment holiday availability, adding to their website a section on “Our proposals to extend support”, stating:

 

“We announced that we would propose more support for people affected by coronavirus. We’ve set out these proposals below. If these are confirmed, we’ll provide details on how to apply for this support.”

 

“Remember, don’t contact your lender about this extended support just yet. But if you’re struggling with your finances, get in touch with your lender to discuss your options.”

 

What Does This Extension Mean for Borrowers? 

 

This extension could come as a great relief for borrowers struggling with mortgage repayments as a result of the coronavirus pandemic. The FCA’s proposals set out earlier this week included the following measures:

 

• Those who haven’t already taken out a payment holiday will be eligible for a maximum of two payment deferrals over a total period of six months.
• Those who already have a payment holiday will be able to apply for another deferral of three months.
• Those who had a payment holiday but have now resumed their mortgage repayments can apply for another deferral of three months.

 

Borrowers who have had two three-month payment holidays already, or alternative support has been agreed with their lender, will not be able to apply for another deferral.

 

The new proposed deadline for requesting a payment holiday is now the 31^st January 2021. It has also been reported that deferrals will not be marked on credit files as missed payments.

 

While the government has claimed that using the mortgage payment holidays will not impact upon borrowers’ credit files, some have reported that they found it difficult to get other types of loans after informing lenders that they had deferred their mortgage repayments.

 

Banks currently have until the 5^th November (this Thursday) to respond to the FCA’s proposal.

In spite of the coronavirus pandemic and the subsequent economic crisis that has ensued, findings suggest that the property market is continuing to boom.

 

Although the global pandemic has effected many peoples’ lives, leading to job losses and a reduction in low-deposit loans, temporary measures put in place by the government have attempted to support the housing market through this turbulent period.

 

With such temporary measures as the stamp duty cut, introduced earlier on in July this year, buyers have been given a window of opportunity in which to buy a new property and save money on certain costs associated with this process.

 

Figures from a property website have recently revealed that during October, the average price of a home in Britain hit £323,530 – a record high. Compared to a year ago, prices are now £16,818 (5.5%) higher, this being the largest rate of increase in over four years.

 

Rightmove director of property data Tim Bannister was reported to comment the following on the matter: “Previous records are tumbling in this extraordinary market, and there are still some legs left in the upwards march of property prices.”

 

Rightmove have announced that their predictions for the annual rate of price growth could peak by December, predicting this to be around 7% higher than it was a year ago.

 

In spite of an effective market closure that occurred between the end of March and the middle of May, Rightmove claim that so far 2% more sales have been agreed in comparison to this time last year. In addition to this, Rightmove have also said that the average time in which to sell a property has also reached a record-breaking high of 50 days – being a whole 12 days faster in comparison to this time last year.

 

Bannister further commented: “Many buyers seem willing to pay record prices for properties that fit their changed post-lockdown needs, though agents are commenting that some owners’ price expectations are now getting too optimistic, and not all properties fit the ‘must have’ template that buyers are now seeking.”

 

“Not only is the time left to sell and legally complete before the 31 March stamp duty deadline being eaten away by the calendar, but more time is also needed because the sheer volume of sales is making it take longer for sales that have been agreed to complete the process.”