Ongoing planning delays and debt finance costs impacting South East development
SHW’s Q3 South East Development Focus reports that ongoing planning delays, rising information requirements and elevated debt finance costs are continuing to weigh on development activity and suppress prices being paid for sites across the region. Developers are becoming increasingly selective, prioritising prime locations unless a non‑prime opportunity offers a clear and compelling upside.
Peter Coldbreath, Partner at SHW, says residential developers are navigating a market where sentiment remains fragile and costs continue to bite. “Developers are being more selective and focussing on prime locations, unless there is a significant upside on considering non‑prime locations,” he says. “House price indices are largely flatlining and there is little expectation of change while volumes traded remain subdued. The uncertainty spilling into market sentiment from global conflicts continues to overshadow UK performance, and we are now watching closely to see whether the new administration can shift both sentiment and the underlying metrics.”
Across London and the South West M25, delays in pre‑application and planning processes continue to stall deals that rely on consent. Price sensitivity is shaping the market, with overpriced opportunities failing to transact. Developers are favouring housing schemes over flats, and viability concerns, particularly around high build costs, are driving strong demand for PD and conversion schemes. In Croydon town centre, consented PDR schemes are set to deliver around 1,600 new homes, though Gateway 2 requirements have slowed the rate of starts on site.
In Kent, Surrey and Sussex, smaller sites remain the focus for developers and investors targeting family housing. Viability challenges persist for flatted schemes, where cost pressures dominate buyer thinking. Slow sales rates and extended holding periods are adding further drag, and housebuilders are quietly positioning themselves by exploring strategic land opportunities ahead of any future uplift in sentiment.
Richard Plant, partner at SHW, notes that underlying demand for homes across boroughs such as Croydon, Bromley, Sutton, Lewisham, Southwark and Greenwich remains strong, but buyers have become far more price‑sensitive as mortgage costs and affordability pressures intensify. “Developers are finding sales rates significantly below pre‑2020 levels, particularly for higher‑density apartment schemes,” Richard says. “For most South London schemes, the main challenge is not planning permission but development viability. Elevated construction costs, Building Safety Act compliance, contractor contingencies, higher finance costs, slower sales and affordable housing requirements are combining to stall many schemes that already have consent.”
Institutional capital remains interested in London’s residential market, particularly Build‑to‑Rent, where confidence in long‑term rental demand is strong. However, investors are favouring operational assets and proven locations, avoiding major development risk.
In the South East commercial property development market, demand for prime industrial and logistics sites remains robust where pricing is realistic. Aspirations often exceed what appraisals can justify, but competitively priced opportunities continue to attract strong interest. Non‑prime sites are still transacting, albeit at lower levels, and anything with planning restrictions or limited hours of use tends to see muted engagement. Planning itself is frequently taking twelve months or more, even for allocated sites, with delays, surveys and red tape adding cost and frustration for developers.
Occupier demand remains dominated by storage and distribution, accounting for around 80% of enquiries. Virtually all schemes are targeting EPC A and BREEAM Very Good or Excellent as occupiers push harder to meet ESG commitments and contractual requirements for greener buildings.