THE PROPERTY FILTER TAKE
Residential construction starts fell 8% in the three months to April 2026 and are down 33% year-on-year, with private housing the hardest hit at 39% below last year's levels (Glenigan).
Fewer project starts mean tighter supply in 12-24 months, pushing up build costs and extending timelines on new-build acquisitions - viability calculations made today may not hold by the time spades hit the ground.
You may wish to focus near-term development appraisals on refurbishment and conversion plays where planning risk is lower and the timeline to completion is shorter than a ground-up scheme.
Residential construction starts have fallen 33% compared with the same period in 2025, the sharpest annual drop in recent memory and a clear warning signal for anyone running development appraisals right now.
What the Numbers Actually Show
According to Glenigan's latest index - covering the three months to the end of April 2026 - overall residential project starts fell 8% on the previous quarter and were down 33% year-on-year. The index includes underlying construction projects valued at up to £100m and figures are seasonally adjusted.
The private housing sector took the steepest hit. Private starts fell 39% year-on-year and dropped a further 9% on the previous three-month period (Glenigan, April 2026 data). Social housing held up comparatively better but still declined - down 4% on the previous quarter and 16% year-on-year.
The build cost implication here is straightforward: when developers pull back on starts, contractors compete for a smaller pipeline. That compression tends to drive short-term softening in tender prices. But the same supply squeeze also means fewer new homes reaching the market in 18-24 months, which tightens stock and supports resale and rental values in established locations.
What the Experts Are Saying
Allan Wilen, Glenigan's economics director, described the market plainly: "Construction markets are becalmed. Faced with heightened geopolitical uncertainty generated by the Iran War, investors are reassessing their development plans."
Wilen noted that while a rise in office, retail and health projects helped stabilise non-residential starts during the period, "both residential and civil engineering starts continued to decline." He flagged that a general consensus points to "fewer opportunities in the back half of this year, which also implies far fiercer competition." He did identify pockets of growth - data centres, purpose-built student accommodation and supermarkets - suggesting that developers with the ability to diversify into those niches are better placed to weather the coming months.
Atul Kariya, head of real estate and construction at MHA, drew on the Construction PMI - the Purchasing Managers' Index, a monthly survey tracking activity levels across the sector - to add further context: "The construction PMI underlines a sector still being heavily squeezed by weak demand and renewed cost inflation, with rising energy prices due to the conflict in the Middle East adding fresh pressure to an already fragile situation."
Kariya pointed to a specific sequencing problem for housebuilders: "Higher input costs hit supply chains just as buyer confidence and mortgage affordability come under strain." He also flagged a broader issue around uncertainty delaying project starts and investment decisions: "Higher build costs, tighter viability, and interest rate uncertainty are making land buying, tendering, and project timing harder to judge."
His near-term outlook was candid: "Unless inflation and financing conditions improve, activity is likely to stay subdued in the near term."
The Planning and Viability Risk for Developers
For anyone actively appraising sites, the practical risk sits in three places.
First, the timeline for ground-up schemes is getting harder to plan around. When contractor capacity is uncertain and input costs are volatile, contingency allowances built into appraisals six months ago may already be out of date. Revisiting build cost assumptions before committing to a land price is not optional - it is basic risk management.
Second, planning risk remains unchanged. The data here reflects activity at the construction stage, not at planning. The planning pipeline has its own delays and constraints, and a fall in starts does not automatically translate into faster decisions from local authorities.
Third, the financing conditions Kariya describes - interest rate uncertainty, tighter viability - affect the point at which a scheme becomes fundable. Deals that pencilled in at one rate environment may not stack up in another.
Refurbishment and conversion plays, where PDR (permitted development rights - a streamlined planning route that can bypass full planning permission for certain change-of-use projects) applies, avoid some of these pressures. The planning risk is lower, the timeline to completion is shorter, and the exposure to prolonged build programmes is reduced. That does not make every conversion deal a good one, but in the current environment the risk profile is more manageable than a greenfield start.
What to Watch Next
The Glenigan data covers the three months to end of April 2026. The next index period will indicate whether the decline is stabilising or accelerating. Wilen pointed to Parliament's prorogation and the upcoming King's Speech as potential inflection points - but noted the general consensus already points to a difficult second half of the year.
For development investors, the near-term picture is one of constrained supply, higher build costs, and uncertain financing. None of that is a reason to stop appraising deals. It is a reason to stress-test them harder.
Key takeaways
Residential construction starts fell 8% in the three months to April 2026 and are down 33% year-on-year, with private housing the hardest hit at 39% below last year's levels (Glenigan).
Fewer project starts mean tighter supply in 12-24 months, pushing up build costs and extending timelines on new-build acquisitions - viability calculations made today may not hold by the time spades hit the ground.
You may wish to focus near-term development appraisals on refurbishment and conversion plays where planning risk is lower and the timeline to completion is shorter than a ground-up scheme.
Related Property Filter resources
Residential construction starts have fallen 33% compared with the same period in 2025, the sharpest annual drop in recent memory and a clear warning signal for anyone running development appraisals right now.
What the Numbers Actually Show
According to Glenigan's latest index - covering the three months to the end of April 2026 - overall residential project starts fell 8% on the previous quarter and were down 33% year-on-year. The index includes underlying construction projects valued at up to £100m and figures are seasonally adjusted.
The private housing sector took the steepest hit. Private starts fell 39% year-on-year and dropped a further 9% on the previous three-month period (Glenigan, April 2026 data). Social housing held up comparatively better but still declined - down 4% on the previous quarter and 16% year-on-year.
The build cost implication here is straightforward: when developers pull back on starts, contractors compete for a smaller pipeline. That compression tends to drive short-term softening in tender prices. But the same supply squeeze also means fewer new homes reaching the market in 18-24 months, which tightens stock and supports resale and rental values in established locations.
What the Experts Are Saying
Allan Wilen, Glenigan's economics director, described the market plainly: "Construction markets are becalmed. Faced with heightened geopolitical uncertainty generated by the Iran War, investors are reassessing their development plans."
Wilen noted that while a rise in office, retail and health projects helped stabilise non-residential starts during the period, "both residential and civil engineering starts continued to decline." He flagged that a general consensus points to "fewer opportunities in the back half of this year, which also implies far fiercer competition." He did identify pockets of growth - data centres, purpose-built student accommodation and supermarkets - suggesting that developers with the ability to diversify into those niches are better placed to weather the coming months.
Atul Kariya, head of real estate and construction at MHA, drew on the Construction PMI - the Purchasing Managers' Index, a monthly survey tracking activity levels across the sector - to add further context: "The construction PMI underlines a sector still being heavily squeezed by weak demand and renewed cost inflation, with rising energy prices due to the conflict in the Middle East adding fresh pressure to an already fragile situation."
Kariya pointed to a specific sequencing problem for housebuilders: "Higher input costs hit supply chains just as buyer confidence and mortgage affordability come under strain." He also flagged a broader issue around uncertainty delaying project starts and investment decisions: "Higher build costs, tighter viability, and interest rate uncertainty are making land buying, tendering, and project timing harder to judge."
His near-term outlook was candid: "Unless inflation and financing conditions improve, activity is likely to stay subdued in the near term."
The Planning and Viability Risk for Developers
For anyone actively appraising sites, the practical risk sits in three places.
First, the timeline for ground-up schemes is getting harder to plan around. When contractor capacity is uncertain and input costs are volatile, contingency allowances built into appraisals six months ago may already be out of date. Revisiting build cost assumptions before committing to a land price is not optional - it is basic risk management.
Second, planning risk remains unchanged. The data here reflects activity at the construction stage, not at planning. The planning pipeline has its own delays and constraints, and a fall in starts does not automatically translate into faster decisions from local authorities.
Third, the financing conditions Kariya describes - interest rate uncertainty, tighter viability - affect the point at which a scheme becomes fundable. Deals that pencilled in at one rate environment may not stack up in another.
Refurbishment and conversion plays, where PDR (permitted development rights - a streamlined planning route that can bypass full planning permission for certain change-of-use projects) applies, avoid some of these pressures. The planning risk is lower, the timeline to completion is shorter, and the exposure to prolonged build programmes is reduced. That does not make every conversion deal a good one, but in the current environment the risk profile is more manageable than a greenfield start.
What to Watch Next
The Glenigan data covers the three months to end of April 2026. The next index period will indicate whether the decline is stabilising or accelerating. Wilen pointed to Parliament's prorogation and the upcoming King's Speech as potential inflection points - but noted the general consensus already points to a difficult second half of the year.
For development investors, the near-term picture is one of constrained supply, higher build costs, and uncertain financing. None of that is a reason to stop appraising deals. It is a reason to stress-test them harder.
Key takeaways
Residential construction starts fell 8% in the three months to April 2026 and are down 33% year-on-year, with private housing the hardest hit at 39% below last year's levels (Glenigan).
Fewer project starts mean tighter supply in 12-24 months, pushing up build costs and extending timelines on new-build acquisitions - viability calculations made today may not hold by the time spades hit the ground.
You may wish to focus near-term development appraisals on refurbishment and conversion plays where planning risk is lower and the timeline to completion is shorter than a ground-up scheme.
