The Intermediary – October 2025 - Flipbook - Page 53
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“magic away” the macroeconomic headwinds.
He adds: “Build costs have been rising at a rapid
rate over the past five years.
“If you look at the things that have thrown a
spanner in the works since 2016 – there’s been
Brexit, Covid-19, Liz Truss, inflation, and mortgage
rates. If you were risk averse, you would have done
nothing through that whole time.”
Indeed, many have retreated. But where some
see paralysis, others see potential.
Heath says: “Those who are really looking to
capitalise on uncertainty are the ones that are
going to see larger profits.”
Heath points to a shift already underway in the
investment landscape, which sees landlords and
mid-tier investors offloading portfolios as 5-year
fixed rates expire, rolling from 3.5% loans into
7% or 8% remortgages that break their business
models. A lot of those assets are being picked up
by opportunistic funds that have liquidity and the
appetite for complexity.
He says: “There’s going to be some significant
gains made, be it in the acquisition of single buyto-let units, blocks of flats, or picking up vacant or
struggling commercial buildings to redevelop.”
Kerschbaumer says: “There are still developers
out there with a healthy risk appetite, but they’re
having to be creative – finding deals with strong
enough returns to make the risks worthwhile.
“We’re seeing a growing number of option
agreements, along with developers refocusing on
different sectors, and an increased acquisition of
sites subject to planning.”
Powell sees it as a kind of natural selection,
saying: “There have been periods in the last 15
years where being a developer and making money
has not always been through skill. It has been
through market rise and a bit of luck in timing.
“Now, a lot of that chaff in the market has
been whittled away. You just can’t be lucky at the
moment, you’ve got to be really good, and you’ve
got to create genuine value.”
But there is a downside. As the barriers to entry
rise, small to medium enterprises (SMEs) are being
squeezed out by excessive regulation.
Powell warns: “The Government has run the risk
of over-regulation. You risk that loss of the SME –
the backbone.
“There are clearly big players that move the
needle, but I think you would see a huge hole
created if you killed the SME in this market,
because the big boys can’t just take everything.”
T H E FOR E IG N MON E Y M Y T H
Overseas investors remain cautious,
favouring long-income and alternative
commercial assets over traditional
residential developments.
If the domestic picture is difficult, surely overseas
investors can fill the gap? Not quite. For all the talk
of global capital flooding back into London, the
panel agrees that the foreign injection is a myth.
“There’s still appetite,” Heath says. “But they
need to be very clear on what they’re investing
in, making sure the assets they’re dealing with
are solid.”
The post-Grenfell regulatory environment,
coupled with a slower residential sales market,
has pushed many overseas investors to pivot away
from traditional development risk toward longincome asset classes.
Heath says: “I have a handful of Middle Eastern
investors, and where they would normally put it
into turn-key bricks and mortar developments, →
