Improving conditions across the lending landscape are helping to lift developer confidence heading into 2026, although specialist finance is still expected to play a central role in overcoming persistent challenges.
Jonathan Samuels, ceo of Octane Capital, said that sentiment among UK property developers has strengthened as funding conditions have stabilised, particularly following the Bank of England’s decision to cut interest rates in December.
The latest survey of UK property developers, commissioned by Octane Capital, found that two thirds, 67%, believe property market conditions will improve in 2026, while a third remain more cautious.
More than a third of developers, 36%, said they are more likely to progress or break ground on development or investment projects in 2026 compared with 2025.
A further 34% expect activity levels to remain broadly unchanged, while 30% anticipate scaling back activity, pointing to a more balanced but generally improved outlook for the year ahead.
When asked what would drive any improvement in market conditions, developers most commonly pointed to a stabilising lending landscape.
Reducing interest rates were cited by 34% as the key factor, while improved lender confidence, at 24%, and increased availability of finance, at 14%, also ranked highly, underlining the importance of a more predictable funding environment.
Despite the more positive sentiment, challenges remain widespread. A significant majority of developers, 82%, said they still face obstacles in the current market.
High build and labour costs were identified as the most pressing issue by 34% of respondents. Planning delays or uncertainty were cited by 20%, followed by funding delays at 14%.
Exit risk or slower sales and valuation gaps were each highlighted by 11%, while limited flexibility from mainstream lenders continues to restrict delivery for 10% of developers.
DEVELOPMENT STRATEGIES
Against this backdrop, specialist finance is expected to remain central to development strategies in 2026. Around two thirds of developers, 65%, said they expect to use specialist finance to help navigate these challenges.
Bridging finance is anticipated to be the most commonly used product, at 33%, followed by development finance, 23%, refurbishment or light development finance, 18%, and development exit finance, 15%.
Samuels said: “Developers are clearly drawing confidence from a stabilising lending environment, particularly with interest rates now moving in the right direction and now that Autumn Budget uncertainty has lifted.
“This stability is crucial, as it allows developers to plan with greater intent, however, confidence alone does not remove the underlying challenges faced.
“Build costs, planning delays, and funding constraints remain an issue, which is why specialist finance continues to play such an important role.
“Flexibility and speed are increasingly critical when navigating the market, and specialist lenders are well placed to support developers as they move projects forward in 2026, particularly where traditional funding routes remain constrained.”
