However, all is not lost and the tide is gently beginning to turn as we round off 2024.

The economic backdrop
Interest rates are finally coming down. Andrew Bailey has stated that he’s expecting four cuts next year, which should be a catalyst for our market – fuelling levels of new loans, new starts and transaction volumes.

This should also help stabilise long-term lending in the market, critical to bolstering PBSA and later living assets, for which demand is strong and growing across the country. Generally, the market has priced in where they stand on spending and taxation.

However, announcements from the Autumn Budget did spur some inflationary pressures and threatened to put the brakes on the downward trajectory for interest rates, with knock-on effects for borrowing, and in particular mortgages. We have seen some stabilisation and a gentle return of economic confidence towards the end of 2024.

This time last year, the departure of equity from the market was proving a significant obstacle to getting projects off the ground. Happily, we’re beginning to see the gap close and equity return to the market.

We are also seeing a growth of appetite at the top of the capital stack from senior mezzanine, equity and debt providers with the potential to significantly boost financing activity in the year ahead.

2025: a do or die year for housebuilding?
Our new Labour government has set an ambitious target of building 1.5 million homes over the next five years, which, together with the necessary planning reform, financial backdrop and political momentum could see housebuilding finally turn over a new leaf in 2025.

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Our 2024 manifesto for planning reform laid out eight calls to action from SME developers who continue to face significant financial burdens and project delays.

Policies such as Section 106 and the Community Infrastructure Levy regime currently stand as roadblocks for SME developers trying to get projects off the ground.

Given that private developers delivered over 60% of the UK’s new housing stock between 2021 and 2022, we need to see urgent reforms to clear the way for SME developers to play their part in meeting the government’s ambitious targets. 

Looking ahead
As the market steadily returns to more favourable conditions, there are many reasons to be optimistic for the year ahead. At Atelier, we expect to see increased competition and good terms available in the coming year, accompanied by sites being traded more frequently.

However, we may also see a crystallisation of losses where forbearance has been the order of the day in some loan portfolios in recent months.

Developers also face a significant change in building regulations with the Future Homes Standard coming into effect next year.

At Atelier, we’ve published our own set of guidance to help developers prepare for the incoming changes and to mitigate costs down the line — it is crucial that developers begin to factor the FHS into their 2025 planning and budgeting.

2024 witnessed some big, ambitious promises for our housing market. Only time will tell whether 2025 will see the delivery of these promises and the dial finally shift for housebuilding in the UK.