UK Developers Move to Deferred Land Deals to Combat Market Pressures
Knight Frank's latest Residential Development Land Index finds that developers are increasingly turning to deferred payment structures when buying land, paying more of the price as homes are built and sold rather than up front. The approach is being used to manage risk as viability is squeezed by high borrowing and build costs, slower sales and continuing planning delays.
Charlie Hart, head of development land at Knight Frank, said such arrangements are not new but are becoming more common. He described them as less than ideal but useful for keeping deals moving, adding that their spread reflects the strain on the sector, with many schemes paused or being reconsidered for other uses.
Land values continued to ease in Q2. Greenfield values fell 5.5% in the quarter and 3% over the year; Prime Central London values dropped 1% in the quarter and 3% annually; and urban brownfield values slipped 2.5% in the quarter and 5% year on year.
Oliver Knight, head of residential development research, said developers remain interested in land but are more selective. Higher oil and gas prices in the quarter raised inflation expectations and clouded the outlook for interest rates, making larger, longer-running schemes harder to underwrite. Demand is strongest for fully consented, shovel-ready sites, which are scarce.
The firm's survey of more than 35 housebuilders found planning delays were the most cited problem (64%), followed by buyer sentiment (52%) and the short-term economic outlook (48%). Urban brownfield schemes face the toughest viability test, held back by build costs, affordable housing requirements, weak off-plan sales and Gateway 2 risk.
Hart said planning improvements alone will not deliver the 1.5 million homes target and called for positive government intervention. Nearly eight in ten developers reported fewer site visits and reservations in Q2, almost six in ten expect reservations to be lower in 2026 than last year, and around 60% expect land values to soften further.
Source: UK Property Forums, original article (1 September 2026)
