UK Property Sector Sees Highest Lending Figures, Funding Circle Data Reveals
Wednesday 15 July, 2026 – The UK property sector is a major economic driver in the country, employing over 12 million people and contributing £1.7 billion directly to GDP annually. However, the industry is currently facing a number of challenges, from regulations to rising costs. In light of these issues, Funding Circle has released a report examining the state of the property industry and the potential future for the sector.
According to Funding Circle’s data, the Property and Construction sector has seen the highest amount of lending across industries, with a 30% year-on-year increase. While the property sector ranks fourth overall for percentage change, the amount of lending makes it the largest single industry category.
The increase in lending demonstrates the growth of the sector and the projected turnaround of market volatility. Despite rising costs, landlords and construction companies have remained resilient, continuing to operate and drive growth.
Funding Circle’s data also revealed that the reasons for the increase in lending are likely reflective of sustained development activity and working capital needs in the sector. This is supported by an increase in lending for both categories in the last year, as reported by internal lending data. There was a 16% increase in companies requiring a loan for working capital and a 25% increase in lending used to expand or grow a company. Greater refinancing levels within the sector may also be contributing to higher average loan sizes.
To gain a better understanding of these lending trends, it is important to look at the wider context across the industry. Market conditions and sector-wide developments may also be influencing borrower behaviour and financing needs, as we examine other issues affecting the property market.
Lower Housing Demand, But Rentals Set to Surge
As of April 2026, buyer demand is running 7% lower than the same period in 2025, according to Rightmove. However, the UK continues to face a shortage of homes, as reported by The Guardian. This means that while costs may be increasing, the demand for new housing remains high.
Zoopla reports that as of June 2026, the average UK rent is now £1,321, with rents having risen by 2.1% over the past year. This trend is expected to continue, especially in more affordable areas, as elevated mortgage costs price many first-time buyers out of the most expensive cities. This sustained rental demand will help drive growth in the sector.
The property industry has also seen significant growth in terms of new businesses. According to the Office for National Statistics (ONS), the number of VAT and/or PAYE businesses across the property industry has slowly increased over the last three years, giving it a slightly broader market share across all sectors.
Housing Materials Have Increased Over 50% in the Last Five Years
While increasing regulations may lead to reduced profits for housing businesses, the overall costs associated with building housing assets have also caused concern in the industry. According to a report by the Department for Business and Trade, building materials such as precast concrete and insulating materials have increased by 62% and 60% respectively over the past five years. On average, all materials listed have increased by 52% since May 2020.
The latest government construction material costs report shows a lower demand across several core materials, such as bricks, concrete, sand/gravel, and cement. This reflects a potentially slower-moving construction industry, especially in the housing and new-build sectors. While construction material price inflation has eased compared to previous years, the amount of stock on hand and lower deliveries suggest a quieter period for the industry.
According to BCIS construction forecast, building costs are expected to increase by 14% over the next five years. This will result in an increase in spending for companies in the property and construction industry. On average, it currently costs a minimum of £126,000 to build a full three-bedroom house. With the projected 14% increase, the cost will rise to £143,640 in five years. Additionally, when factoring in the increase in building materials and operating costs, developers could end up paying £19,915 more to build and maintain a home in five years. This could potentially impact the value and number of property developments that smaller SMEs are able to achieve. As such, businesses will need to carefully consider their development plans and make strategic financial decisions.
How Property Businesses Can Leverage Their Funding This Year to Gain Growth
Despite the volatile market in the property industry, there is still potential for growth in the sector. According to a report on SME growth and innovation behaviours in 2025, around 27% of SMEs grew in 2025, and 41% are planning to grow further.
2025 All SMEs
Grown
Scale Up (10 yrs)
Plan to Grow
Grown and grow again
Property/Business Services
30%
27%
45%
20%
This report is reflective of
