10 Jan Mezzanine Finance, Brexit and Property Investment

Mention the word Brexit and depending on who you’re talking to will depend on which way the conversation swings. Regardless of the predictions both good and bad, Brexit will bring opportunity to the property investment business.

Whether or not the uncertainty surrounding Brexit is merely a rumour, there will always be some activity in the property development and construction business. This will maintain a demand for mezzanine finance.

Mezzanine Finance – Demand

Mezzanine finance is a unique financial resource in the property development sector. It is often forgotten about when talking about the economic seas we find ourselves in. Be they rough or calm.

The Brexit vote and the consequent speculation and rumours have stirred those seas up somewhat. Yet, there remains some optimism about the buoyancy in the property development market. Although again, it will depend on whom you ask.

Investment in existing residential property for redevelopment or even buy-to-let purchases has taken a hit since the outcome of the Brexit vote. Not for long, however.

Property funds suspended redemptions very soon after the result of the vote up until December 2016, when they reopened. Fund managers ensured that liquidity of the funds was increased sufficiently to handle any additional withdrawals.

This, of course, had an immediate effect on profitability. Importantly though, the funds did not become unprofitable, the move simply offered lower returns. This was possibly the only major notable hiccup in the Brexit saga so far.

Asian Investment Beats Off European Brexit Fears

Despite the naysayers, business investment continues. European investors are not the only ones with interests in the UK property market. Even residential property developers will notice the resilience of the market when looking at recent figures on investment from outside the UK.

Asian investors haven’t floundered in the least. The Indian subcontinent and China continue to show an increased level of investment in residential property, boosting development opportunity. The mezzanine funding demand can be expected to follow closely.

In 2016, the Asian investors accounted for 28% of transactions in the UK property market. This is a noticeable increase in investment from outside of Europe. In the year leading up to April 2017, Chinese enquiries into the UK property market were up 60% on the previous year.

Property investors from Europe and the west are simply creating a void that is filling with Asian investment. The growth in property investment is unlikely to slump. The source of investors is simply going to change.

Property developers and mezzanine finance providers, in turn, need not be wary of slumps in the market. Investors have made it clear that the UK is still the place to invest. Investors have voiced their opinions that Brexit doesn’t bother them.

London is London and is still attractive for investment. But property investors are looking across the UK and still investing in cities like Birmingham and Manchester.

Optimism Has Been Established

Commercial property continues to raise different opinions, and yet the market continues to favour the opinion of the optimists. Richard Probert, head of marketing at Ballymore, a commercial property developer, notes that business still goes on. Companies need change or businesses have to move because landlords end their agreements.

Brexit is not going to kill the property industry. The industry will change. The source of the investors too. Even the locations invested in will change. The need for property development funding including mezzanine funding will, however, remain.

Belgravia Property offers expert advice and sources mezzanine finance opportunities for both lenders and borrowers. Make an appointment to speak to our financial expert and to review all your options.