Developer confidence weakens as reliance on specialist finance grows, says Octane Capital

The specialist lender's quarterly survey found that just 23% of developers expect property market conditions to improve this year, down from 35% in the first quarter.

Confidence among property developers weakened further during the second quarter of 2026, with more firms expecting challenging market conditions and turning to specialist finance to progress projects, according to research from Octane Capital.

The specialist lender’s quarterly survey found that just 23% of developers expect property market conditions to improve this year, down from 35% in the first quarter.

More than three-quarters (77%) now believe conditions will remain challenging.

As confidence has fallen, reliance on specialist lending has increased.

More than four in five (83%) developers said they expect to use specialist finance to navigate current market conditions, up from 72% in Q1.

Bridging finance remained the most commonly cited funding option, with expected usage rising from 40% to 44% quarter-on-quarter.

Anticipated demand for development finance also increased, from 24% to 29%.

The research also pointed to growing caution around new projects.

While the proportion of developers more likely to begin new developments or investments remained unchanged at 20%, those less likely to proceed rose sharply from 37% to 57%.

Meanwhile, the proportion expecting activity to remain unchanged almost halved, falling from 43% to 23%.

Almost all developers surveyed (97%) said they continued to face obstacles in the current market.

High build and labour costs remained the most significant challenge, cited by 35% of respondents, while planning delays and uncertainty were identified by 29%, making them the second biggest barrier to development.

Despite the subdued outlook, developers said lower interest rates would have the greatest impact on improving market conditions (23%), followed by improved lender confidence (20%) and greater availability of finance (16%).

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.”

He aded: “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.”