UK property development in 2026 can appear daunting considering the constant negative headlines. Even our own recent property development viability article discusses many of the big issues facing developers and housebuilders in the current market compared to 5 years ago. The viability squeeze that we discuss in that article focusses on research from HBF around the costs of building an average new build home compared to 2020, including build cost inflation, Building Safety Levy, Biodiversity Net Gain, labour shortages and other aspects of development.
However, the good news is that property development hasn’t stopped working altogether in 2026. In fact, there are many examples across the industry of great schemes, delivering much needed housing, and returning a profit to investors, shareholders and funders. Schemes can absolutely be viable, and developments can work, but the rules in the current market have simply changed.
Development Has Become A Selection Game
The reality is that not all development opportunities are affected in the same way. Some sectors of the market have become significantly more challenging than others, particularly where land was acquired at values at the peak of the market, where build costs have increased materially since land acquisition, or where profit margins were already thin. Conversely, other opportunities may emerge such as sites coming about as a result of changing planning policy, or evolving occupier demand and the repurposing of existing buildings to create new ways to generate value, for example commercial to residential conversions, compared to new-build ground-up development.
In our experience, the developers performing best in today’s market aren’t necessarily those taking on the biggest or most ambitious projects. More often than not, they are the developers who truly understand their local market, buy the site at the right price, maintain discipline within their development appraisals and focus on opportunities where value can be actively created, rather than relying on market growth as some have done in the past. The phrase “You Make Your Money on the Buy” has always applied to development, but has never been more fitting than in the current market.
Historically developers have been able to make mistakes, and still complete developments unscathed – often still with a profit. However, in the current market where price growth is relatively slow or static, getting bailed out by price growth and ‘easy gains’ are extremely rare. In a world where margins are already tighter and capital is more expensive, discipline has become one of the most valuable competitive advantages a developer can possess.
The Best Developers Start With The Exit
Its not unusual for us to hear from developers who are seeking advice on financing options when trying to acquire a new site. They may have had some indicative build costs, produced an approximate GDV, and made some assumptions on the build programme. Far fewer stop to consider whether there is actually strong demand for the end product – does the planning consent work for the local demand, do the local demographics fit, are there suitable comparables?
In our experience, in-depth local market knowledge (or research) and understanding who the eventual buyer is usually lead to the best outcomes. We’ve seen consented schemes for apartment buildings where the core demand is family housing. We’ve also seen plans for luxury oversized apartments when local affordability is constrained or demand for higher-end property is limited. Local affordability data is accessible online, and so too is local employment data, census information, house price information, supply and demand data and various other forms of information to help understand the local market. Agents and property consultants can also help to provide useful information regarding a local market.
The developer exit strategy is also critical, which goes beyond just “we’ll sell the units”. Units can be sold individually, sold in bulk, or kept via buy to let mortgages and rented out. If being sold individually, developers need to consider whether off-plan sales are possible and the rate at which units are likely to sell. Will development exit finance be required to give the developer more time to sell once the construction is complete? Will agents be required to sell the units and have these costs been allowed for in the appraisal? What level of marketing, branding and placemaking will be required to support the sales rate and sales values in the appraisal? The point is that the exit strategy should influence decisions from the outset, rather than being considered later once planning has been secured or construction has started. This will ensure the best possible results, and also to secure the most appropriate development finance lender and rates.
The exit strategy should also take into account the void holding costs of any stock, which can apply during a refinance period for a buy to let hold strategy, just as much as during a sales period for a disposal strategy. Developers frequently overlook these costs which can mount quickly, particularly for apartment buildings. Finished properties may incur council tax, utility charges, and maintenance costs (such as service charges) as well as requiring cleaning and internal maintenance. Building insurers will also require unoccupied property inspections (where unoccupied property is permitted in the policy) and so additional time and administration may be required.
Property Development Deals We Like In 2026
None of this means that developers should stop looking for new opportunities. Quite the opposite. In our experience the strongest projects in today’s market tend to share a common theme – they create value through planning, repositioning, refurbishment or through perfect local market knowledge, rather than by simply relying on rising house prices or ‘hope’. Of course, every project should be assessed on its own merits, but here are some of the opportunity types that we continue to find particularly interesting in 2026.
Small Infill Sites
In our experience, smaller infill schemes continue to offer attractive opportunities in many parts of the UK, particularly where local demand is strong and competition from larger housebuilders is limited.
Why we like them:
- Can be lower capital requirements
- Usually shorter development programmes
- Less competition from PLC housebuilders
- Easier project oversight and risk management
- Often suitable for first-time developers
- Often overlooked by larger developers and institutional investors
Planning Gain Opportunities
Planning gain opportunities give developers the ability to create value through planning and continues to be one of the strongest tools available. Whilst planning risk must be carefully assessed for each site, opportunities still exist where land is underutilised or alternative uses may be appropriate and justified.
Why we like them:
- Value can be created without construction risk
- Existing use may generate income during the planning process
- Planning gains can significantly improve site viability
- Can create opportunities for both site disposal and development
Commercial to Residential Conversions
Evolving occupier demand continues to create opportunities to repurpose existing buildings such as commercial to residential development conversions. Where the location and end product are appropriate, conversion projects can outperform ground-up developments – particularly where conversions result in unique property types and layouts.
Why we like them:
- Existing structure already in place
- Potential for value creation through change of use
- Permitted development rights may assist certain projects
- Strong housing demand in many locations
- Often faster than ground-up construction
- Sometimes existing tenants provide short-term income if planning permission is required and/or start on site is delayed
Heavy Refurbishment and Repositioning
Some developments can be successful without requiring demolition and reconstruction, such as heavy refurbishment development. These projects typically involve improving, extending, materially altering, or repositioning existing assets to create new value.
Why we like them:
- Opportunity to unlock value from underperforming assets
- Potentially shorter programmes than new build schemes
- Can improve rental income as well as capital value
- Suitable for offices, mixed-use buildings and redundant property
- Sites often benefit from existing infrastructure and services
Smaller Development Schemes
Many of the national headlines often focus on housebuilders and major housing developments, but many successful small development projects are delivered by regional or private developers operating at a more manageable scale.
Why we like them:
- Local developers usually have deep local market knowledge
- Smaller businesses usually have greater flexibility and speed of decision making
- Lower exposure to single-project risk
- Strong opportunities in niche local markets
- More manageable funding requirements
Deals We Are More Cautious About 2026
Even experienced developers come to us with challenging sites. Some key examples of issues we typically see are:
Overpaying for land. We see this either where developers were drawn into a bidding process or negotiation with the landowner, or where their appraisal assumptions simply couldn’t support the land price being paid.
Assuming that values will rise. We still see development appraisals that assume house price inflation. Whilst this is common in a rising market (and therefore even our own property development appraisal calculator includes house price inflation options), the assumptions need to be a realistic reflection of the market conditions and, ideally, also include corresponding cost inflation.
Weak contingencies. It’s so easy to start cutting contingencies when margins are tight and a project needs to be justified. A fully costed risk and contingency register is ideal, but otherwise a standard 5-10% (depending on the project) is recommended. Development finance lenders will expect to see a robust contingency in appraisals.
Highly speculative planning assumptions. Incorrect or speculative planning assumptions can have a major impact on scheme viability. If the intended scale or volume of development is not achieved then the price paid for the site may have been too high (unless there is a planning-linked price mechanism). Elements of the scheme that might have been required to support the intended values may not be approved, for example car parking, certain features, or amenity space and therefore there may be a shortfall in the GDV. Realistic planning assumptions based on professional advice is recommended.
Long-term land banking without a clear strategy. Developers who acquire land speculatively or sites which they feel may eventually be redeveloped have nothing to measure against if there isn’t a clear strategy. Tying a site back to an appraisal with sensible assumptions and defined timescales provides a far clearer framework for decision-making than simply waiting for values to increase over time, or for planning policy to change.
Development Finance Still Matters More Than Most Developers Think
We love development finance, but we appreciate it might not be everyone’s favourite subject! That said, we find that developers often spend significant amounts of time looking at planning, construction, technical matters and sometimes sale values, but comparatively little time on the funding. We regularly see developers who choose not to use a broker and instead reach out to funders directly or simply continue to work with the same lender they have used before. Whilst using a broker isn’t essential, missing out lenders or products that might have been available could have a material impact on the scheme profitability, particularly on lower-margin projects.
The difference between lenders or products isn’t just about the headline interest rate. Funding structure can affect how much equity a developer needs to contribute, the interest structure can impact cashflow, and arrangement and exit fees can vary significantly. On larger schemes especially, relatively small changes to funding costs or leverage can have a meaningful impact on developer and investor returns.
Developers must also consider how resilient their development appraisal models remain if assumptions change. Build costs can increase prior to entering in to a fixed price contract (and in some cases thereafter!), programmes can overrun, and sales can (and usually do) take longer than expected. The strongest schemes are usually the ones that continue to work even when some of the assumptions move negatively, and rarely the ones that only work under perfect conditions.
What Successful Developments Have in Common
Clearly successful developments can come in all shapes and sizes. They can be new build ‘ground up’ schemes, commercial conversions, heavy refurbishments, or planning gain projects. They can also be delivered by first-time developers just the same as experienced builders. In our experience, the common success factor is rarely the property type, location or scale of the development. More often than not, successful developments begin with a realistic understanding of the opportunity, supported by sensible assumptions and a clear strategy, all packaged up in a robust development appraisal.
Developers with disciplined decision-making usually deliver more stable projects. These developers understand the local market intimately, remain realistic about risk, challenge their own assumptions regularly, and adapt when circumstances require change. They usually recognise that development isn’t just about finding the perfect site, but more so about consistency in making good decisions throughout the project lifecycle – at acquisition, planning, funding, construction and exit.
There is no doubt that the market has become more challenging, but we continue to see well-planned and well-executed schemes succeed, delivering both much-needed housing (including S106 contributions, CIL and Affordable Housing) as well as returns to the developer and/or investors.
Not only is every development project different, but opportunities that work for one developer may not work for another due to their structure, capital stack, processes, experience and so on. If you are assessing a site, reviewing an appraisal or exploring funding options for a scheme, we would be happy to discuss the project and help you understand what may be achievable.
