Latest Octane survey shows lack of confidence in current conditions
Developer confidence has fallen in Q2, down from more than a third (35%) expecting UK property market conditions to improve during Q1 to less than a quarter (23%) in Q2. More than three-quarters (77%) expect conditions to remain challenging.
The research, part of a quarterly survey commissioned by Octane Capital, shows that developers are becoming increasingly reluctant to start new projects, with 57% now less likely to break ground, compared to 37% in Q1.
The number expecting activity levels to remain broadly unchanged has almost halved, falling from 43% to 23%, although the proportion more likely to break ground on development or investment projects remains unchanged at 20%.
Build costs biggest barriers
Developers cite high build costs (cited by 35%) and worsening planning delays (29%) as the biggest barriers.
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%).
Reliance on specialist finance is increasing, according to Octane, with 83% of developers expecting to use specialist lending, 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 increased, up from 24% to 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.”
