More considering bridging finance
Developers are increasingly turning to specialist lending to navigate economic uncertainty, with 83% expecting to use it, up from 72% last quarter.
Bridging finance remains the most widely expected specialist lending product, with expected usage increasing from 40% to 44% quarter-on-quarter. Demand for development finance has also risen, up from 24% to 29%, according to the latest quarterly sentiment survey from Octane Capital.
Interest rate cuts were identified as the single biggest factor that could improve market conditions (23%), followed by improved lender confidence (20%) and greater availability of finance (16%).
Reluctance to start new projects
It comes as developers are increasingly reluctant to start new projects, with 57% now less likely to break ground, compared to 37% in Q1.
The proportion expecting activity levels to remain broadly unchanged has almost halved, down from 43% to 23%. The number more likely to break ground on development or investment projects remains unchanged at 20%.
Only 23% of developers believe UK property market conditions will improve during 2026, down from 35% in the previous quarter. More than three-quarters (77%) expect conditions to remain challenging.
Developers say that barriers include high build and labour costs (35%) and concern around planning delays and uncertainty (29%).
Jonathan Samuels, CEO of Octane Capital, said: “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.”