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Is the housebuilding downturn stopping viable developments from proceeding?

ended 05. September 2026

The latest S&P Global UK Construction PMI shows residential construction falling sharply in August.

Overall construction activity declined from 44.7 in July to 44.3, remaining below the neutral 50 level for a twentieth consecutive month. Housing recorded a much steeper reading of 37.6 and was the only construction category where the rate of contraction accelerated.

The full release is here:

https://www.pmi.spglobal.com/Public/Home/PressRelease/5ccf1580ad5d42eeacff49e087b73944

Bridging Loan Directory is looking for first-hand evidence from developers, housebuilders, brokers, lenders and property advisers:

• Are viable residential schemes being delayed, reduced or abandoned?

• Is the main constraint buyer demand, development finance, borrowing costs, build costs or planning?

• Are lenders changing leverage, contingency requirements, sales assumptions or lending decisions?

• Are slower sales increasing demand for development-exit or bridging finance?

Recent anonymised examples are welcome. Where possible, please include figures, the type of development and what changed.

Responses of around 100–200 words by 11am on Monday 7 September, please.

4 responses from the Newspage community

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Editor
Tony Sanchez
Founder at Bridging Loan Directory
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Evren Ergin
Founder And Developer at ValuQ
The constraint has moved. Planning permission is no longer the main thing holding sites back, particularly after last month's planning reforms. The binding constraint now is viability, and viability is decided by the gap between what a scheme costs to build and what the finished homes will sell for.

That gap has narrowed. Official figures show sale values broadly flat, with average UK house prices up just 2.0% in the year to June 2026 and only 0.1% between May and June. Buyer demand is weak at the same time, with the RICS residential survey reporting new buyer enquiries at a net balance of minus 28% in July. Build costs and development finance have not fallen to match.

So schemes that were underwritten on stronger price assumptions no longer add up, even where the homes are needed and already consented. Developers respond by phasing more slowly, selling in bulk to institutions at a discount, or shelving sites until the sale side recovers.
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Editor
Iain Thompson
Director at Evolve Finance
The devastating 37.6 housing PMI reading highlights that the housebuilding downturn isn't caused by a lack of viable schemes, but by a severe capital bottleneck. Independent SME developers are trapped in a three-way margin squeeze between sticky material costs, local planning backlogs, and restrictive development finance criteria.

Lenders have reacted to this contraction by aggressively adjusting their metrics. We are seeing construction contingencies routinely pushed from 5% to 10%, while maximum loan-to-cost caps are shifting lower. Because stretching retail transaction times are slowing down sales assumptions, lenders are heavily reducing upfront senior debt advances to insulate themselves from exit risk.

This capital squeeze is driving an intense reliance on bridging capital to hold land banks, or deploying Development Exit Finance to survive the retail standstill.
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Rupert Collingwood
Founder at The London Broker
Viability is the key, with the new homes market suffering a significant drop off in popularity as a result of buyer demand falling, particularly in the London flats market. Recent tax & regulatory changes are hindering demand from domestic landlords & international buyers in particular.
Moreover domestic buyers are looking towards larger homes further afield rather than smaller flats closer to central London, as they prioritise long term planning (i.e. children) over convenience of commute.
This drop off in demand is impacting achieved sales values as well as supply, which in and of itself is a doom loop with one feeding the other as slower sales leads to increased supply.
Builders are looking at the performance of their current projects as well as those of their competitors and questioning the assumptions made on the next, and rightly so.