From View From The Top, 19 November 2025
Back to Equity: Why the Hard Work Starts Now
For half a decade, the industry convinced itself that credit was the safe, steady, “smart” place to live. Senior loans, conservative LTVs, yield with downside protection.
But the truth is finally catching up with the market: Lending money is easy. Getting it back is hard.
2025 will be the year where the UK real estate market stops talking about deployment and starts talking about recovery. It’s already happening.
1. The Illusion of Safe Credit (and the Reality of the Workout Cycle)
The workout phase of the cycle has arrived — quietly, but decisively. We’ve seen it in our own loan book, and if lenders don’t say they have problems they are simply just lying.
Some numbers tell the story:
- UK development loan defaults are estimated to be up 20–30% year-on-year in the SME segment (varies by lender).
- Construction delays have stretched an average of 6–12 months or more beyond original underwriting.
- Build costs are still 22–28% above pre-2020 levels, depending on region.
- Exit values are down 10–15% from 2021 peaks in many resi sub-sectors and as much as 40% in prime markets. When you actually hit the bid.
- UK development loan defaults are estimated to be up 20–30% year-on-year in the SME segment (varies by lender).
- Construction delays have stretched an average of 6–12 months or more beyond original underwriting.
- Build costs are still 22–28% above pre-2020 levels, depending on region.
- Exit values are down 10–15% from 2021 peaks in many resi sub-sectors and as much as 40% in prime markets. When you actually hit the bid.
The gap between a lender’s model and a scheme’s reality has never been wider. The tide is out and everyone smart need to get real.
Alternative lenders — once the heroes of the 2019–2023 cycle — are discovering the limitations of being “senior secured” when:
- Sponsors are under-capitalised
- Banking liquidity has tightened
- Refi options are thin if non existent
- Schemes need re-design, not re-papering
- Financial engineering and kicking the can down the road doesn’t work anymore
- Sponsors are under-capitalised
- Banking liquidity has tightened
- Refi options are thin if non existent
- Schemes need re-design, not re-papering
- Financial engineering and kicking the can down the road doesn’t work anymore
Security doesn’t deliver units. Security doesn’t stabilise a rental building. Security doesn’t negotiate with a contractor who’s already insolvent.
The hard part is the workout. And most lenders weren’t built for that part. Some of course got smart and in the last two years have built up big workout teams but they are the exception.
2. The Return of Real Work (and the Operator Advantage)
The next phase of the cycle will not be won by capital structure. It will be won by competence.
The platforms with the edge now are the ones who can operate at ground level. Not abstractly. Literally on-site. Investment managers who have a wide skill set and tool box to do what needs to be done and who understands the complexity of development lending and building stuff.
Why? Because the market has shifted to an execution problem:
- Planning approvals are taking 30–50% longer in many UK councils
- Contractor failures have risen sharply, with over 4,000 construction insolvencies in the last 12 months
- Labour shortages remain structural, especially in London and the South
- Rental demand is +10% per year, but delivery is negative — a mismatch only operators can exploit
- Planning approvals are taking 30–50% longer in many UK councils
- Contractor failures have risen sharply, with over 4,000 construction insolvencies in the last 12 months
- Labour shortages remain structural, especially in London and the South
- Rental demand is +10% per year, but delivery is negative — a mismatch only operators can exploit
The advantage sits with those who can:
- Re-price and redesign schemes
- Value-engineer properly
- Address distressed cap stacks
- Step into JV roles
- Deliver mid-market rental at scale
- Own and operate with discipline
- Re-price and redesign schemes
- Value-engineer properly
- Address distressed cap stacks
- Step into JV roles
- Deliver mid-market rental at scale
- Own and operate with discipline
This is the operator cycle. And it naturally favours equity over credit because equity can fix things, take control, and finish assets. That’s what we at Hilltop Capital Partners does best.
3. The UK Reality Check — and the Southern Europe / Spain Contrast
The UK is stuck in a slow, grinding correction:
- Transactions down ~25% year-on-year
- Land values re-pricing by 15–30% depending on use class
- Mortgage approvals still below trend
- Developer liquidity thinning sharply
- Institutional capital is still “waiting for clarity” (i.e., waiting for someone else to take the first hit)
- Transactions down ~25% year-on-year
- Land values re-pricing by 15–30% depending on use class
- Mortgage approvals still below trend
- Developer liquidity thinning sharply
- Institutional capital is still “waiting for clarity” (i.e., waiting for someone else to take the first hit)
Meanwhile, Southern Europe — specifically Spain — is operating under very different forces:
Demand is booming:
- Spain welcomed over 500,000 new long-term foreign residents over the past two years
- UK, Nordic, Dutch, German, and CEE inflows remain structurally strong
- International schools, health systems, and infrastructure are absorbing record numbers
- Spain welcomed over 500,000 new long-term foreign residents over the past two years
- UK, Nordic, Dutch, German, and CEE inflows remain structurally strong
- International schools, health systems, and infrastructure are absorbing record numbers
Supply is constrained:
- Housing production in Spain is still 40–50% below the 2007–08 peak
- Costa del Sol alone needs 40–50k new units but is delivering only a fraction
- Land release and construction capacity are tight
- Housing production in Spain is still 40–50% below the 2007–08 peak
- Costa del Sol alone needs 40–50k new units but is delivering only a fraction
- Land release and construction capacity are tight
Yields and IRRs still work:
- Properly executed mid-market rental and small multi-family yield 5–6%+ net
- Value-add schemes can still push mid-teens IRRs without hero assumptions
- Lifestyle resi continues to sell at a premium with international absorption
- Properly executed mid-market rental and small multi-family yield 5–6%+ net
- Value-add schemes can still push mid-teens IRRs without hero assumptions
- Lifestyle resi continues to sell at a premium with international absorption
Where the UK is unwinding leverage, Spain is absorbing demand.
One market is dealing with the past. The other is building the future. This isn’t political criticism it’s just plain fact.
And capital quietly wants exposure to both — but for entirely different reasons.
THE TAKEAWAY
This cycle belongs to operators, builders, and people who can do the hard things well.
Capital that understands workouts will win in the UK. Capital that understands absorption will win in Spain. Capital that understands both will lead the next cycle.
Equity — real equity, with real work behind it — is finally back.
Long term capital needs to be backing platforms and managers that are active. Not just allocate capital with a small group of people who never leave their office.
HARD LANDING:
The Transition May Be Painful — But the Old Way Isn’t Coming Back. Just like opportunity funds were the flavour of the day and now mostly gone, long term capital needs to be looking to back active managers. People with hands on experience. It’s a tough transition because that means cutting out a lot of the middle. That idea doesn’t sit well with a lot of people.
Across markets, careers, and personal reinventions, the same truth holds:
Doing things the old way feels comfortable — but that won’t move you forward.
Whether you’re restructuring a loan book, repositioning capital, or rebuilding your own life after a hard landing, the moment always arrives when you must let go of the familiar playbook.
The transition is uncomfortable. But staying the same is worse.
Hard Landing is built around this idea: that change is survivable, rebuilds are possible, and the next chapter can be stronger than the one you lost — if you’re willing to do the hard work.
More on that soon as we prepare the launch.
