Key takeaways from the Birmingham Property and Developer Show on smarter procurement and changing development landscape

The UK's property development sector is entering a period of notable change. Rising construction costs, shifting political priorities, evolving planning powers and increasing pressure to deliver new homes are creating both challenges and opportunities for developers across the country.

While economic conditions remain uncertain, one thing is becoming clear: success will increasingly depend on buying smarter, building more efficiently, and understanding where future investment will be directed.

Rising Construction Costs Continue to Challenge SME Developers

Construction cost inflation remains one of the biggest pressures facing the industry.

For many SME house builders, the challenge begins long before work starts on site. Material costs are often estimated during the planning stage, but lengthy planning processes mean that by the time projects receive approval, the cost of those same materials has frequently increased significantly. Variations and specification changes during construction can add further pressure to already tight margins.

Since 2020, the cost of materials required to build a single new home has increased by approximately £37,000, highlighting the scale of inflation affecting the sector*. According to the Building Cost Information Service (BCIS), construction material costs remain around 39% higher than pre-pandemic levels*, with overall building costs forecast to increase by a further 13% over the next five years. Average building material prices also rose by 3.3% between December 2024 and December 2025*.

With UK construction costs typically ranging between £1,755 and £3,000 per square metre*, even modest procurement savings can make a meaningful difference to project profitability.

The Growing Divide Between National and SME House Builders

These cost pressures can have a more immediate impact on SME developers, who often operate with different purchasing models to larger house builders.

While larger house builders may benefit from established supply arrangements and economies of scale, smaller businesses typically purchase through builders’ merchants and distributors. This can mean they have less flexibility to absorb changes in material costs or availability, particularly during periods of high demand.

Procurement itself also consumes valuable management time. Comparing suppliers, negotiating discounts and monitoring price changes all create additional administrative burdens that divert focus away from delivering projects.

The wider housing market illustrates this growing imbalance. According to the National House Building Council (NHBC), six developers accounted for 56% of new home completions during 2025*, reflecting the scale major national builders bring to housing delivery.

Smarter Procurement Is Becoming a Competitive Advantage

Rather than simply trying to negotiate harder, many SME developers are adopting more collaborative procurement strategies.

Property developer buying clubs are becoming increasingly popular by combining the purchasing power of multiple developers. Through partnerships with national manufacturers and suppliers, helping smaller businesses benefit from some of the economies of scale typically associated with larger purchasing volumes.

Alongside reducing administrative workload, members can often achieve savings of around 25% on qualifying purchases*, helping improve profitability.

As margins continue to tighten, smarter procurement is becoming less of a cost-saving exercise and more of a strategic advantage.

A Challenging Economic Backdrop

While construction costs continue to rise, developers are also operating against a changing economic landscape.

Interest rates are still expected to edge upwards, while inflation is forecast to rise modestly. Although inflation has supported house prices to some extent, underlying property values have shown limited evidence of sustained organic growth.

The employment market also reflects an economy adjusting to slower growth. Payroll employment has fallen by 138,000, vacancies have reduced to approximately 707,000, and unemployment currently stands at 4.9%**. Rather than widespread redundancies, many employers are implementing hiring freezes and delaying recruitment.

A More Selective Property Market

Residential property transactions are becoming increasingly cautious.

Housing stock available for sale has increased by between 10% and 15%, giving buyers greater choice while reducing urgency. Sales agreed during June were 8.9% lower than the previous year, while the average gap between asking prices and achieved sale prices has widened to 20.8%**.

Most significantly, 46% of listed properties are withdrawn from estate agency books without completing a sale**, demonstrating how much more selective buyers have become.

Meanwhile, demand within the rental market remains exceptionally strong, with average monthly rents now reaching £1,755**, reinforcing the continuing imbalance between housing supply and demand.

Infrastructure and Devolution Could Drive the Next Phase of Growth

Against this challenging backdrop, regional investment presents one of the sector's biggest opportunities.

Government policy increasingly points towards greater devolution, transferring planning, regeneration, transport and investment powers to regional mayors and combined authorities.

Infrastructure spending is expected to extend beyond traditional transport projects into housing, utilities, and digital infrastructure, creating opportunities for regeneration-led development across the country.

This shift could allow planning decisions to be made closer to local communities, giving regions greater flexibility to deliver developments that reflect local priorities while accelerating regeneration.

Housing Delivery Remains the Biggest Challenge

Despite ambitious housing targets, delivery remains a significant concern.

Current plans provide for around 18,000 homes yet estimates suggest closer to 90,000 homes** are required to make a meaningful impact on housing waiting lists.

With local authorities continuing to navigate a range of financial and operational priorities, collaboration across the housing sector will be increasingly important in meeting future housing demand.

This places even greater importance on creating an environment where local authority development arms, housing associations, SME and large developers can all thrive and contribute to delivering the homes communities need.

Digital Infrastructure Is Reshaping Development

Another rapidly expanding area is digital infrastructure.

The growth of data centres is transforming site selection, with developers increasingly prioritising access to the grid over traditional location factors. Reliable energy infrastructure is becoming one of the primary considerations when identifying development opportunities, demonstrating how technology is reshaping investment priorities.

Where Investment Is Likely to Flow

Current expectations suggest that regions with established combined authorities and strong devolution agendas will receive the greatest levels of public investment.

The Northwest, Yorkshire and the West Midlands are widely expected to become key beneficiaries, attracting funding for regeneration, infrastructure, and housing development.

Alongside higher-density residential schemes, office-to-residential conversions, mixed-use developments, and town centre regeneration projects are all expected to become increasingly important components of regional growth strategies.

Looking Ahead

The UK development market is being shaped by two powerful forces.

On one side, rising construction costs and procurement challenges continue to squeeze margins, particularly for SME house builders. On the other, devolution, infrastructure investment and regional regeneration are creating significant opportunities for those prepared to adapt.

For developers, success will increasingly depend on more than simply building homes. It will require smarter procurement, stronger regional partnerships, and a clear understanding of where investment, planning powers and future growth are likely to be concentrated.

In a market where every percentage point of margin matters and political priorities are shifting rapidly, those able to buy smarter, respond to changing regional strategies and position themselves ahead of future investment will be best placed to thrive.

*Statistics taken from Shane Traynor, The Property Developer Buying Club, The Rise of Building Costs talk.

** Statistics taken from Adam Lawrence, Propenomix, What does the Burnham world look like talk.

‍