Developer confidence weakened further during the second quarter as economic uncertainty, high costs and planning delays continued to affect the viability of new projects, research from Octane Capital reveals.
Just 23% of developers expect UK property market conditions to improve during 2026, down from 35% in the first quarter. More than three-quarters (77%) anticipate conditions will remain challenging.
Against this backdrop, 83% expect to use specialist finance to navigate current market conditions, up from 72% three months earlier.
Bridging finance remains the most popular specialist product, with anticipated usage rising from 40% to 44%. Expected demand for development finance increased from 24% to 29%.
SHYING AWAY
Developers also appear increasingly reluctant to commit to new schemes. The proportion saying they are less likely to break ground on development or investment projects climbed from 37% to 57%.
Just 20% said they were more likely to proceed, unchanged from the previous quarter, while the proportion expecting activity to remain broadly stable almost halved from 43% to 23%.
Almost all developers surveyed (97%) said obstacles remained in the market. High building and labour costs were the most commonly cited challenge at 35%, followed by planning delays and uncertainty at 29%.
Falling interest rates were identified by 23% as the factor most likely to improve market conditions, followed by greater lender confidence at 20% and wider availability of finance at 16%.
“Build costs remain stubbornly high.”
Jonathan Samuels (main picture, inset), CEO of Octane Capital, says: “The second quarter has seen confidence soften further, with developers clearly becoming more cautious about both current market conditions and the prospects for the remainder of the year.
“Build costs remain stubbornly high, planning delays continue to frustrate development activity, and wider economic uncertainty is making it increasingly difficult for developers to commit to new projects with confidence.
“At the same time, we’re seeing specialist finance become more important than ever. The continued increase in demand reflects the fact that developers still want to transact, but they’re increasingly looking for lenders that can provide the speed, flexibility and certainty needed to navigate a far more complex market.
“Whilst sentiment has undoubtedly weakened, opportunities still exist for those able to move decisively, and that’s exactly where specialist finance continues to play such an important role.”
