Continued economic uncertainty has further weakened confidence across the UK development sector during the second quarter of 2026, with developers becoming increasingly reliant on specialist finance to help navigate a more challenging market, according to Jonathan Samuels, chief executive of specialist lender Octane Capital.
The quarterly survey, commissioned by Octane Capital, tracks how developer sentiment, project appetite and reliance on specialist finance are shifting as market conditions evolve.
The latest research shows that just 23% of developers now believe UK property market conditions will improve during 2026, down from 35% in the previous quarter. More than three quarters (77%) now expect conditions to remain challenging.
As confidence has deteriorated, reliance on specialist finance has continued to strengthen:
- 83% of developers now expect to use specialist finance to help navigate current market conditions, up from 72% in Q1
- Bridging finance remains the most widely expected product, with usage rising from 40% to 44% quarter-on-quarter
- Development finance demand has also increased, rising from 24% to 29%
Developers are becoming increasingly cautious about progressing new projects. The proportion more likely to break ground on development or investment projects remained unchanged at 20%, but the number stating they are less likely to proceed has climbed sharply from 37% to 57%. Meanwhile, the proportion expecting activity levels to stay broadly unchanged has almost halved, falling from 43% to 23%.
This more cautious outlook reflects continued challenges facing the sector, with almost all developers surveyed (97%) stating that obstacles remain within the current market. High build and labour costs remain the most significant challenge, cited by 35% of respondents, while concern around planning delays and uncertainty has increased notably to 29%, making it the second biggest barrier to development activity.
Despite the weakening outlook, developers believe improvements to the lending environment could help unlock activity. Falling interest rates 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%).
The findings suggest that whilst confidence has weakened further, developers remain focused on progressing opportunities where possible, increasingly looking towards specialist lenders capable of providing the speed, flexibility and certainty required to navigate today's more complex market.
"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," said Jonathan Samuels, chief executive of Octane Capital (pictured).
"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."
