UK housebuilding sector shows promising recovery

The UK housebuilding sector is showing early signs of recovery, with 83% of businesses confident about the year ahead, according to the latest Barclays Business Prosperity Index report. 

Housebuilding - Barclays

This optimism is driven by increased activity in the early stages of development, sustained demand for new-build homes, particularly among younger buyers, and significant planned investment in innovation and talent.
Architects and Quantity Surveyors experienced increased cash flows between Q3 2024 and Q3 2025, indicating a strengthening development pipeline.
Businesses plan to increase overall investment by approximately 38% in the next 12 months, focusing on marketing, new equipment, and attracting talent. Larger firms are leading this investment drive, while smaller firms remain more cautious.
The sector is heavily investing in new construction methods to address skill shortages, early career schemes, and training. AI investment is substantial, particularly in electronics, for AI-assisted design, planning, renewable materials, and business automation.
While nearly all firms prioritise aligning with the Future Homes Standard, 82% are concerned about their readiness, especially regarding low-carbon heating, the new Home Energy Model, and ventilation standards. However, proactive steps are being taken, with 30% investing in specialist equipment and compliance training.
New-build homes are popular, especially among Gen Z (61% of homeowners) and first-time buyers (47% of recent purchasers). Desirable location is the primary driver (28%), followed by favourable mortgage terms (20%) and energy efficiency (17%).
High construction costs (25%), rising inflation, raw material costs, and meeting Future Homes Standard requirements (all 19%) remain significant challenges for housebuilders.
While developers anticipate customisation and digital infrastructure to be key influences, consumers prioritise access to gardens/green spaces (42%), proximity to transport (31%), and parks/countryside (30%). Customization and digital infrastructure rank lower for buyers.
Jason Constable, head of Real Estate, Barclays Corporate Banking, said: “The level of innovation we’re seeing across the industry from larger developers to specialist trades is encouraging, with businesses investing in technology, skills and modern construction methods to boost productivity. These innovations, combined with stronger consumer demand for new-builds, present a significant opportunity for housebuilders. While affordability and planning delays still pose challenges, the underlying strength of demand points to clear potential for growth as market conditions stabilise.”
John Ainsworth, head of Real Estate, Barclays Business Banking, added: “Activity is generally subdued among SME housebuilders, with nearly three in 10 expecting no increase in output in the year ahead. Yet SMEs are working hard to overcome skills shortages and regulatory alignment, with their resilience coming through strongly as they show confidence in their future success. If the industry is to hit the Government’s target and build the much-needed homes of the future, it’s vital we continue to support the scale-up of smaller regional players. At Barclays, we are committed to providing the external finance needed to scale via our Business Prosperity Fund.”