Property and construction has become the single largest industry for borrowing on Funding Circle’s platform, with lending to the sector up 30 per cent year on year, according to the lender’s latest data.
The appetite for property development finance is striking given the pressures bearing down on the sector. The figures suggest landlords and construction firms are borrowing through the squeeze rather than retreating from it, a bet that development activity will outrun rising costs.
Three sectors posted sharper percentage growth, with Consumer Services up 46 per cent, Wholesale up 40 per cent and Agriculture up 31 per cent, followed by Automotive at 22 per cent. But in absolute terms, property and construction took more lending than any other single industry category, according to Funding Circle.
Why demand for property development finance is climbing
Funding Circle’s internal lending data points to two drivers. Loans for working capital rose 16 per cent over the past year, while lending used to expand or grow a business climbed 25 per cent.
The lender also suggested that greater refinancing activity within the sector may be pushing up average loan sizes. That chimes with a mortgage market where mainstream lenders are pulling back, as our recent coverage of Virgin Money and Clydesdale withdrawing from buy-to-let lending showed, leaving borrowers to shop around harder for finance.
Funding Circle attributed the overall increase to sustained development activity and working capital needs across the sector.
Rental demand is doing the heavy lifting
The lending story sits against a mixed housing market. Buyer demand in April 2026 was running 7 per cent below the same period in 2025, according to Rightmove, although a Guardian report notes the UK still faces a persistent shortage of homes.
Rents tell a different story. The average UK rent now stands at £1,321, up 2.1 per cent over the past year, according to Zoopla’s June 2026 rental market report. London is the only region recording a rise in rental demand, at 6 per cent, as elevated mortgage rates keep more people renting for longer.
Zoopla expects rents to rise fastest in the UK’s more affordable areas through 2026, while high mortgage costs continue to lock first-time buyers out of the priciest cities. That echoes the cooling but still positive rent forecasts for 2026 we reported at the end of last year.
The sector is also growing in breadth. ONS figures show the number of VAT and PAYE registered property businesses has edged up over three years, from 114 in 2023 to 118 in 2024 and 122 in 2025, lifting the industry’s share of all businesses. Average house values in England rose 0.8 per cent in February.
Building costs remain the thorn in the side
The cost of actually building has moved sharply against developers. Analysis for the Department for Business and Trade by Caldo found precast concrete products up 62 per cent and insulating materials and metal doors and windows each up 60 per cent since May 2020, with the materials listed rising 52 per cent on average over five years.
The government’s latest construction materials commentary shows softer demand for core materials including bricks, concrete, sand and gravel, and cement, with higher stocks and lower deliveries pointing to a quieter spell for housebuilding, even as price inflation eases.
Looking forward, the BCIS construction forecast expects building costs to rise 14 per cent over the next five years. On a minimum £126,000 build cost for a three-bedroom house, that adds £17,640, taking the total to £143,640. Add in electricity bills of £11,073, forecast by Pegasus to rise 20 per cent to £13,288, and developers could be paying £19,915 more to build and run a home within five years.
What this means for investors
The Funding Circle numbers suggest capital is still flowing towards property, but increasingly to fund resilience rather than expansion alone. With rents rising, buyer demand soft and build costs forecast to climb steadily, the investors best placed to benefit will be those who can borrow on sensible terms now and target the affordable regions where rental growth is expected to run hottest. Smaller developers, facing a near £20,000 rise in the cost of delivering a single home, will need to pick their sites with more care than ever.
