How to make a deal stack in 2025

With the first months of 2025 underway, property investors and developers reflect on what was a challenging past year.

This time last year, GDP was flat, inflation was stubbornly sitting at 4% and the Bank of England’s base rate had flatlined at 5.25% following two Monetary Policy Committee ‘hold’ votes after 15 consecutive rate increases. And with a General Election looming, the political landscape looked uncertain from both a UK and geo-political perspective.

The outlook for the UK property market was equally as lacklustre. According to widespread industry speculation, house prices were anticipated to fall by an average of 2.7%, creating added uncertainty for developers in relation to where, and if, they should build next.

In order to succeed, developers need to be able to sell their current sites, identify new profitable sites to develop and have confidence in the market to believe they can crystalise that profit. But, as we all know, these property development cycle components have been hampered with challenges, not just in 2024, but for the past few years.

Was 2024 such a bad year?

Believe it or not, no, it wasn’t because all of the property commentary and macro market forecasts didn’t actually transpire as anticipated.

Looking back at the Bank of England’s MPC report in November 2023, 12-month GDP growth through to 2024 was expected to be marginally positive. Meanwhile, Q4 2024 inflation was reportedly anticipated to stand at 3.1%, the base rate at 5%+ and unemployment at 4.5%. But looking at all of these measures, the economy is actually in a better position today than originally expected.

Furthermore, the latest property market indices are reporting 12-month growth rates of +4.8% (based on the latest figures published by Halifax in November 2024) and +3.7% (Nationwide, November 2024). Interestingly, these results are a long way away from the late 2023 forecasts that were shared by many credible property market commentators.

Property developers need confidence in the stability of house prices to undertake sites, especially under tighter margins. With that confidence, they will build (as long as they can find sites where vendors have realistic, residual-based valuation expectations), of course.

So, is it time to get building?

Looking back at recent CrowdProperty macro and property market presentations, these tend to capture the sentiment of the market in the main title. In November 2023, it was Tough Times. In March 2024, A Glimmer of Hope. In June 2024, A Window of Opportunity. And, most recently, in December 2024, Let’s Get Building, which still fits the current landscape. The titles nicely represent how the market has strengthened and how property professionals, particularly developers, feel.

But is 2025 the year to get building? All of the main indicators are certainly pointing in the right direction - there’s curre ntly stronger demand, constrained supply and plenty of Government support. Collectively, these components are capable of creating tangible market opportunity. Already, we’re starting the new year with:

A stronger-looking economic outlook

Inflation is under control, interest rates are projected to be 3.7% by the end of the year, unemployment is at a five-decade low and real wage growth is rising at a higher rate than inflation.

Continued house price growth

The outlook for the next 12 months is certainly far more positive than last year – mortgage rates are easing and growth is currently forecast at 3.3% vs. -2.7% this time last year. All things considered, the general consensus is that prices are well-balanced, i.e. inflation adjustments and property prices sitting at the same levels as 2003.

With more transactions freeing up developers’ equity for their next projects, plus less uncertain costs and a more confident exit market, housebuilding is once again seeing tailwinds that are being further boosted by the Government’s housebuilding stimulus.

For developers, especially small and medium-sized developers, there’s a real opportunity for them to get building the infinite supply of development opportunities for 1, 2, 5, 10 or 20 homes at sites that are uneconomic for volume housebuilders to pursue.

However, despite the opportunities, challenges do still exist, making the pathway to stacking deals far from straightforward. However, with the right insight, it is possible to carve out a clear pathway to success, starting with the best practice guidance I’ve shared below.

My top six tips for developers moving into the 2025 market:

Do: Have the confidence to get building - but still be selective about the sites you choose to take on and make sure your decisions are underpinned by achievable economics. Developments invariably involve considerable effort and numerous contingent elements. Remember, there must be worthwhile reward at the end of it all.

Don’t: Settle for anything less than great sites - not all vendors’ expectations are based upon what can be paid for sites (always work from residual-based valuations when bidding). This means the better you are at finding great site opportunities, the more you will have to trade off against each other. In turn, this will enable you to make better, more informed decisions about which sites to progress. We can help you validate the economics of sites and identify the best sites to develop.

Do: Focus on the long-term - as mentioned above, while there has been no real (inflation-adjusted) house price growth since 2003, nominal price growth of 100%+ during that time has meant that long-term asset holders have made considerable money. Irrespective of inflation, if a property is purchased for £100,000 with a £75,000 mortgage, and the nominal house price growth of the last 20 years has inflated that figure to £200,000, your equity investment is now worth 5X, despite there being no inflation-adjusted growth. Wherever possible, keep more of the properties you develop to generate long-term slow wealth.

Don’t: Forget to be more strategic - Property development is a business and you should therefore think extremely carefully about the: market in which you operate; customers you serve, competition you face and the capabilities you have to do business within your chosen geography/segment. How can you excel, create that competitive advantage and generate greater profitability? Incorporating more business strategy thinking into your property business will benefit you in the short, medium and long-term.

Do: Think about scaling your activities - which is also a key business strategy tactic. While many of the components that make up developments may be bespoke to the individual sites, they are consistent in terms of the resources that are required, especially people and partners. If you want to scale your business, it needs to be efficient and easier each time. Get this right, and you can successfully balance developing two concurrently running sites, when before it may have been just one. And then, before you know it, four becomes two, and so on. At the same time, focus on building your team and service providers around you, so that you can all achieve greater success together.

Don’t: Overlook the importance of procurement - costs have been extremely volatile over the last few years, with raw materials and building contract quotations varying hugely in price. Whatever your operating model (in-house vs. contracted out works), make it your business to delve into the detail of your costs – to validate that they are correct and identify hidden opportunities to cut them and make more profit. This is where you have the most control over the profitability of a site. Developing and/or recruiting professional procurement skills can add significant value within this area too.

Let’s get building

I’m excited about what 2025 has to offer. Property development is fundamentally important to the economy, and to housing, and there’s a burning platform of demand ready and waiting to be taken advantage of. With the right outlook and approach, small and medium-sized developers can play a pivotal role in transforming these opportunities into much-needed properties and spearheading the UK housebuilding sector’s efforts to get building again.