Developers are increasingly using deferred payment structures that reduce upfront capital commitments when acquiring land as a way of managing risk at a time when viability remains under pressure, according to Knight Frank’s latest Residential Development Land Index.
The structures allow a greater share of the land purchase price to be paid as homes are built and sold.
According to Knight Frank’s figures, residential development land values continued to soften during Q2 2026 as higher borrowing costs, elevated build costs and weaker sales rates weighed on scheme viability.
Greenfield land values fell 5.5% during the quarter, taking the annual decline to 3%. Prime Central London (PCL) land values declined 1% over the quarter, leaving values 3% lower year-on-year. Urban brownfield land values fell 2.5% during the quarter, extending annual declines to 5%.
Charlie Hart, head of development land at Knight Frank, said: “Deferred payment structures have been around for some time, but they are becoming more common as developers look for ways to manage rising construction and delivery risks. While it’s not the most ideal solution, they can provide much needed flexibility around capital commitments and help transactions progress that might otherwise stall.
“However, their growing use reflects the pressure facing the sector. Developers are doing everything they can to get deals over the line, but viability remains a major challenge. As a result, many schemes are being put on hold or exploring alternative uses, while the industry waits for conditions to improve.”
Oliver Knight, head of residential development research at Knight Frank, said: “While there is still appetite for land acquisition, developers are having to adapt to current market conditions and are becoming more selective. Rising oil and gas prices during the second quarter increased inflation expectations and created greater uncertainty around the outlook for borrowing costs.
“That has made it more difficult for developers to underwrite projects with confidence, particularly larger schemes with longer delivery timelines. Against this backdrop, there is a strong focus on fully consented, shovel-ready sites that can be brought forward quickly, although they remain in short supply.”
