The construction and property development sector is poised for a robust recovery in 2025 following a difficult 2024, marked by three consecutive years of decline.

Rangewell, a specialist lending expert, reports early signs of revival despite the recent downturn. The forecast indicates a significant rebound in 2025, with specialist lenders demonstrating increased appetite and higher loan-to-value ratios.

Rangewell’s analysis reveals that the sector has faced economic challenges, leading to more selective lending practices. Outstanding lending in construction fell by 7.2% in 2023 and 4.0% in 2022, with a further drop of 5.2% anticipated in 2024 before a recovery in early 2025.

The decline in lending has also affected dwelling starts, with 162,350 new dwellings recorded in 2023-24, down 19.8% from the previous year. This follows a 2.6% drop in 2022/23. Rangewell predicts a 2.9% decrease in market size for 2024, reversing the growth trend of 2022 and 2023.

However, the outlook is improving. The Bank of England’s interest rate cut to 5% in August, with another expected in November, is likely to lower financing costs. This should stimulate commercial interest and boost demand in the residential construction sector.

Moreover, the Labour government’s ambitious housing targets—including a goal of 1.5 million new homes and potential reclassification of green belt land—signal a positive shift. Rangewell has observed increased lending appetite in the latter half of the year.

Alasdair McPherson, Head of Partnerships at Rangewell, remarked: “The construction and property development sector is emerging from a challenging period marked by economic uncertainty. We anticipate a contraction in 2024 due to current trends, but confidence is returning. Lending conditions are improving, and with expected interest rate cuts, we foresee a strong uplift in 2025. Developers with strong projects are already receiving better lending terms.”

Data Tables and Sources

• Market Size: IbisWorld
• Dwelling Starts: Gov UK, StatsWales, Gov.Scot, Finance Northern Ireland
• Lending: Bank of England
• Forecasts: Rangewell