Residential set for survival: Increased financing activity indicates growing confidence across real estate

Dave Davies, head of real estate lending, Barclays Corporate Banking


With inflation continuing to ease and interest rates appearing to have peaked, the industry is now asking when, rather than if, there will be a gradual cut in rates. A higher level of financing activity in the first quarter of this year shows that confidence is growing.


Strong fundamentals in residential

Activity in the residential sector is increasing as investors press ahead with new schemes and investment plans. However, it is well recognised that the government’s target of 300,000 new homes a year by the mid 2020s has been missed by more than 33% for the last decade.


With speculation about an autumn stamp duty cut, and mortgage approvals continuing on an upward trajectory in anticipation of falling finance costs, the indicators are more positive for homeownership. However, many potential buyers still face affordability challenges and the proportion of homeowners in England has continued to fall in recent years, standing at 65% in 2023, up slightly from a trough of 62.6% in 2017.


Against that backdrop, the private rented sector has already doubled in size since the early 2000s. According to Barclays UK, the build-to-rent market has expanded over the same period as a percentage of total investment, with increased diversification of product, including co-living and senior living models.


While the sector is not immune to the headwinds of higher finance costs, affordability constraints and potential rent regulation, the investment landscape for the next few years is expected to be more positive than it has been for some time, and the sheer weight of capital looking to invest will continue to underpin high levels of financing activity.


As transactional activity recovers, Barclays is well placed to support the financing needs of both existing and new clients, with growth in our real estate lending book a key strategic aim this year.


Supporting clients

Many of Barclays’ real estate clients have continued to demonstrate their ability to manage risk in extremely testing conditions over the last 18 months. We believe that our approach to relationship banking is ideally suited to supporting clients in meeting both their short- and long-term financial goals.


Equally, we are now beginning to see social value schemes that foster a sense of community and promote wellbeing attract high levels of investor interest.


The financial sector has an important role to play in helping to address climate transition and creating more sustainable communities in the future.


Hear Amy Crick, head of London, UK real estate, Barclays Corporate Banking, speak on Evolution in real estate: Embracing alternative assets at UKREiiF on Wednesday 22 May at 14:00.