The UK property market is showing signs of renewed stability after a prolonged period of disruption, with developers increasingly turning to forward funding as traditional lending remains constrained.
According to a new report from Heligan Group, institutional investors are once again deploying capital into large residential and living-sector projects, offering developers a degree of certainty that has been largely absent over the past two years.
House prices have risen 2.8% year-on-year, suggesting that the market is beginning to settle after inflationary pressures and rising interest rates weighed heavily on activity. While borrowing costs remain elevated, the report argues that developers are adjusting to the new landscape by seeking alternative structures to maintain momentum across key sectors.
Build-to-rent, purpose-built student accommodation and the industrial and logistics markets continue to account for the strongest demand. At the same time, tight credit conditions have slowed development starts, prompting a shift towards forward funding arrangements that can secure capital earlier in the process and reduce exposure to fluctuating exit values.
Heligan says institutions such as pension funds and long-term real estate platforms are taking advantage of the opportunity to acquire income-producing assets at pre-construction pricing. This, in turn, is enabling well-structured schemes to proceed despite the more challenging debt environment.
Sam Lewis, director of debt advisory at Heligan Group, said: “The second half of 2025 marks a turning point for the UK property sector, and we’re seeing tentative but genuine signs of recovery, supported by a more stable rate environment and increased policy intervention.
“Developers and investors are recalibrating their strategies to match a market that is slowly regaining balance.”
He added that the tightening of traditional debt markets had accelerated the push towards forward funding. “As the traditional debt markets have tightened, developers are increasingly looking to forward funding to bridge the gap between ambition and liquidity. Institutional capital has recognised this shift and is responding decisively.”
Lewis said recent major commitments across the PBSA and build-to-rent sectors showed confidence returning to living-sector assets. He noted that both developers and funders were becoming more selective, with the former under pressure to provide stronger financial structures and clearer risk strategies, while the latter sought to back schemes in the strongest locations.
“Recent large-scale forward-funded PBSA transactions and major BTR pipeline commitments signal confidence returning to the living sector. And developers and funders are both adapting,” he said.
“For developers, success now hinges on presenting financially robust, well-structured proposals with clear planning and risk management. For forward funders, the advantage is selectivity – they can now choose the best schemes in the best locations.
“The key to success for both developers and investors is collaboration and transparency.”
The report also highlights the growing importance of debt advisory services as the lending landscape becomes more complex. With a widening mix of alternative lenders, family offices and private debt funds operating in the market, Heligan has seen increased demand from developers seeking capital and from investors looking for structured opportunities.
“Put simply, developers must now put their best foot forward the first time,” said Lewis. “Forward funders expect clarity, credibility and commitment. And those who can demonstrate this will find that capital is still available, even in a challenging macro environment.
“The forward funding resurgence will remain a defining feature of the real estate finance landscape into 2026, as the market transitions from caution to selective confidence.”
