The property development and investment markets – how is 2024 shaping up?

Commercial Lending March blog  

Gareth Davies, head of business development for Commercial Lending at Hodge, shares his thoughts on the state of the property development and investment markets and what’s on the horizon for the rest of 2024.

It’s hard to believe we’re already at the end of Q1 with the Easter break fast approaching. It’s certainly been a busy start to the year for the team at Hodge and I think it’s fair to say the past six months have been a tale of two halves. The last quarter of 2023 was challenging with comparatively low levels of transactions throughout November and December in particular, with some borrowers opting for an early festive break to put a volatile and challenging year to bed.

However, things seem to be looking brighter so far this year as we’ve noticed a significant uptick in activity across both property development and investment since January. In the two and half months to [13^th] March 2024, we’ve completed more than £22m of property development and investment deals supporting our brokers and clients with their funding requirements as well as building a strong pipeline for the next six months.

From a product perspective we’ve seen a material increase in commercial investment enquiries so far this year which is great news given that values have been under pressure recently.  It certainly looks like the tide is turning for commercial investment with activity and associated project values starting to increase for the first time in a while.

We’ve also noticed our commercial and mixed-use investment products are meeting more broker and borrower requirements in terms of both pricing and leverage, an area we’ve focused on specifically over recent months.

While the property development market is still challenging, we’re pleased to have seen an uptick in this area as well. It’ll take further stability in development and finance costs to convince some developers to return to the market. However the fact residential property prices are starting to increase will hopefully provide developers with a level of confidence they haven’t seen for many months, which is vital for the future of the property development market.

Further reductions in inflation, now expected to average 2.1% in 2024 down from 3.1% predicted in November 2023 (Oxford Economics), coupled with an expectation the Bank of England Base Rate is likely to fall in Q3 2024, is starting to drive confidence back to the market. Lending activity is still dominated by refinance deals rather than new purchases but we’re expecting this to change over the next 6-12 months as experienced investors and developers return in larger numbers to see if they can ‘pick up a bargain’.

To find out more about our property development and investment finance options and how we can support your property ambitions, please email us at [email protected] or [email protected].

Why not join our commercial lending mailing list to be the first to receive updates from the Hodge Commercial Lending team and how we can support you – sign up here.