Welcome to State of the Market, our monthly round-up of key property market updates, with actionable insights for small and medium-sized property developers.
Key takeaways – at a glance:
- Bank of England cuts interest rates to 4.25%.
- UK house prices show resilience as transactions tick up.
- Planning reform rollout progresses, with £9.5bn boost still in play.
- Building Safety Levy brings new cost burden for SME developers.
Key takeaway 1: Bank of England cuts interest rates to 4.25%
In a continued easing cycle, the Bank of England lowered the base rate to 4.25% in May, extending its recent sequence of rate cuts that began in August 2024. With headline CPI now projected to dip below 2% in Q2 2025, the Bank is nearing its inflation target, prompting further discussion about the pace of policy normalisation.
“Interest rates have been working to slow down price rises over the past two years, so we are able to cut interest rates again today, to 4.25%,” the MPC confirmed.
Although the Bank emphasised that policy will remain data-driven, this cut signals renewed confidence in economic stability and hints at further easing later in the year, should price stability persist.
What this means for SME developers:
With interest rates continuing to ease, buyer affordability is expected to improve, which could support increased demand in the coming months. Developers should be ready to act on this shift – reassessing paused projects, reviewing pipelines, and ensuring they are well-positioned to take advantage of rising confidence.
Key takeaway 2: UK house prices show resilience as transactions tick up
After falling for two months, house prices dipped again in April by 0.4%, according to the Halifax House Price Index, bringing the average UK property price to £286,896. However, on an annual basis, prices remain +1.1% up – and activity indicators are improving.
The Savills May Housing Market Update notes that while affordability remains a challenge, mortgage approvals have risen steadily, and transaction volumes are edging up, driven by first-time buyers and downsizers. The Bank of England’s rate cut is expected to accelerate this recovery, especially for more affordable stock.
MoneyWeek reports that while premium and luxury segments remain sluggish, middle and lower segments are showing surprising resilience, with buyers now more responsive to falling mortgage rates.
What this means for SME developers:
There is growing buyer appetite, particularly for homes that meet today’s affordability thresholds. Developers should prioritise efficient, cost-effective homes with broad appeal – especially in the £250k–£400k range. Competitive pricing and energy performance will continue to be crucial factors.
Key takeaway 3: Planning reform rollout progresses, with £9.5bn boost still in play.
The UK Government’s planning reform programme, first outlined in full in January 2025, remains a central pillar of housing policy this year. With an ambition to unlock stalled development and generate £9.5 billion in annual economic output, the government is now moving forward with implementation.
Key components of the reforms include:
- Simplified planning applications.
- Performance-based incentives for local councils
- Faster decision-making frameworks
- Updated National Planning Policy Framework (NPPF) to encourage brownfield development
The government has stated these changes are designed to “go further and faster” than previous efforts, with a particular focus on supporting small and medium-sized developers.
“Reforms to get Britain building will boost productivity, unlock new homes and support economic growth,” the official January update declared.
While the intent is clear, delivery hurdles remain. Planning authorities continue to face staffing pressures, and some industry leaders are urging a stronger focus on resourcing and enforcement.
What this means for SME developers:
Planning reform is gaining traction, but its success will vary by region and local authority readiness. Developers should track local policy changes, identify early opportunities created by accelerated planning rules, and prepare to engage with councils who are incentivised to speed up approvals.
Key takeaway 4: Building Safety Levy brings new cost burden for SME developers
The Government is pressing ahead with the Building Safety Levy, a new charge on residential developments in England aimed at funding the remediation of unsafe buildings. The levy will apply to most new residential buildings requiring planning permission, including schemes by SME developers, and is expected to raise £3 billion over 10 years.
Although originally proposed for high-rise buildings – in the wake of the Grenfell tragedy – the levy’s scope has now broadened significantly, with few exemptions beyond affordable housing and self-build homes. Final rates will vary by region, with higher charges in areas like London and the South East – potentially adding significant costs to new schemes.
“Many SME developers will be caught in the net despite having had no involvement in the construction of unsafe buildings”, notes CrowdProperty in its detailed guide to the levy.
Consultation feedback has highlighted concerns that the levy could deter smaller developers from bringing forward projects, particularly on marginal sites.
What this means for SME developers:
Developers must factor in the Building Safety Levy when appraising new schemes and revisiting existing pipelines. Margins may be squeezed – especially in high-value areas – so it’s critical to understand how the levy applies and when it’s due, while working with planning advisors early in the process.
And finally…
Four articles we think you’ll find interesting:
- MoneyWeek: Is now a good time to buy UK housebuilders?
- Halifax: April House Price Index
- Reuters: FCA mortgage reform consultation
- Gov.uk: Reforms to get Britain building
Steve Deutsch, CEO of CrowdProperty, comments:
“We’re seeing the first real signs of market momentum returning, thanks to structural easing in finance conditions, and increased policy focus on housing delivery. That creates opportunity for prepared developers, especially those delivering the right product at the right price.
However, challenges remain. The Building Safety Levy will add another layer of complexity and cost, particularly for SME developers already operating on tight margins. This makes it crucial to work with partners who understand the full picture – from planning and policy to finance and demand – and can help developers navigate this.”
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