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Category: Property Finance News

bridging finance

Bridging Finance – Unregulated Lenders Become Popular

A constantly changing political and economic market has made bridging finance a more attractive option when the need to complete a deal is urgent. It’s interesting to note that despite the high street banks tightening the criteria for bridging loans, the market has grown.

This is mostly due to the increase in popularity of unregulated lenders. Are there risks? Of course there are, but a reputable broker won’t put a new client at any foreseeable risk, and these lenders keep the market buoyant.


Bridging Finance – A Need for Broker Understanding

Recent research undertaken by Hope Capital revealed that as many as 20% of brokers didn’t quite understand the bridging process. This research also revealed that over half of the brokers felt that more flexibility was needed on LTVs.

Just under half also expressed the need for lenders to increase the speed of service. Combined with a reduction in rates, they felt it would improve market accessibility.

The research also revealed common issues that continue to dog the application process for bridging finance. By far the most significant complaint was delays caused by solicitors. Additionally, collating client information and lender approval came a close second.

Jonathan Sealey, CEO at Hope Capital, said, “Like any area of lending, there are areas that brokers would like to see improved. We are keen to address these by always offering the fastest turnaround times”.

Bridging finance increased by 10% during 2017. A clear indication that brokers are turning to bridging lenders to cover gaps that the high street market cannot fill.

It has also become clear that because every client is different, brokers are looking for solutions specific to their client’s needs. Calling for lower rates has been a feature since lending for property finance began. This won’t change, and it is the state of the market that will ultimately dictate how low a lender will go.

Growth in the bridging market is providing more opportunity for unregulated lenders and a good broker will know which ones to turn to. Signals indicate that the market will continue to grow year on year as the regulated industry clamps down on lending criteria.

This does not need to hurt property finance. It is quite possible that emerging unregulated bridging lenders will discover a niche that enables the property market to prosper. Especially for property developers.

property markets

Subdued Property Markets – Developer Survival

According to the Royal Chartered Institute of Surveyors (RICS), demand for residential property continues to decline. The number of homes that have come onto the residential market has increased gradually.

This, however, has been credited to the offloading of some buy-to-let properties. Although supply is not significantly out of balance with demand, the subtle changes in the market over the recent years show that the residential property markets remain subdued. Despite the increase in stock levels with estate agents, the supply of new properties on the market remains at an all-time low.


Property Markets – Price Growth, But Demand Declines

It really doesn’t make sense to develop new properties when demand is dropping. Or does it? With demand for rental properties holding their own and a drop in landlord instruction, rents are going up.

Consequently, even a relatively short-term stint as a landlord will pay off. This is true despite the loss in tax breaks for individuals. Developers that have residential property that has become hard to shift because of the lull in the property markets could consider becoming landlords for a short period until the market develops some buoyancy. As a limited company, they will still enjoy many of the tax breaks available.


Timing is the Key

The capacity to time the upsurge in new demand often determines the success of a property developer. Growth and shrinkage in property markets ebb and flow with economic cycles. Those developers that have been in the business for the long game understand this and are unlikely to consider slow-moving development stock as a heavy burden.

If standing stock that is providing some return, waiting for the next upturn means they will have it ready when demand returns. In the interim, the property that they have on the books could be used as collateral to develop commercial spaces which are new in demand. This is especially true for shared workspaces and warehousing.

It isn’t expected that the property markets are going to pick up toward the end of 2018 either. More likely is the possibility that they will remain subdued as we approach Brexit D-day early next year. The uncertainty of how the economy is going to perform post-Brexit is definitely one of the factors that add to the subdued property market.


Flexibility and Diversity

Ultimately, survival is the flexibility to diversify as rapid market changes take place. For some developers, sitting on unsold stock may mean that they worry about not having the cash flow to start a new project even in a different property market.

When this happens, it’s time to go to an experienced broker such as Sam Hoban at Belgravia Property Finance. Sam has extensive knowledge and experience. He possesses an understanding of how to source financially different products to resolve different situations. Specialist brokers like him have the resources to deal with most property deals.

new property developers

New Property Developers for Amazon Fulfillment Sites

Amazon, the retailing name on the tip of the tongue of any retail shopper, is on the hunt. The company is looking for fulfilment sites to cover the West Midlands and the North East of England.

Having made clear that they have chosen to work with new property developers rather than build their own sites, opportunity has opened up for developers countrywide. This matches the strategy employed when they appointed developers to build their site at Severnside.

With several multi-storey fulfilment centres, they are following the model they have in London. The two models that serve as an example are the London Distribution Park in Essex and Central Park in Bristol. This move reinforces the evidence that the distribution and logistics business continues to grow.

Amazon has clearly developed their business model to utilise the use of multi-storey buildings. In an interview with Property Week, an agent close to the planning revealed that their operations work well on multi-level developments.


New Property Developers See the Opportunity

London distribution parks multi-storey facility boasts several firsts. For starters, it is both the largest and tallest warehouse in the UK. An impressive 61 loading doors provide a streamlined incoming and outgoing logistics stream.

Amazon’s expansion has been notable as in 2016 they took 24% of all new distribution space in the UK. This accounted for about 100 000 sq feet of new space occupied in that year. Although growth was lower in 2017, plans indicate that the space for distribution will increase over the next twelve to twenty-four months.


Retailer Woes Influencing Warehousing and Logistics

While retailers are being forced to rethink their business models, slow change means that there is a real risk of empty warehouses. Retail failures mean that there will potentially be a glut of warehousing space. How serious this becomes will depend on how retailers adapt their business model to cope.

Good examples are the case of Bunnings that canned its 500 000 square foot requirement before it was sold last week. Additionally, Toys R Us and the woes of House of Fraser are indicators of what happens when change is not fast enough.

UK Property Finance

UK Property Finance Buoyant Despite Brexit

The nervousness and volatility surrounding Brexit have become a trending topic for property professionals. As the UK lurches forward toward Brexit D-day, the uncertainty remains.

The UK property finance business, rather than freezing up from fear, has taken the approach that “life goes on”.

An article in Investment Week recently highlighted how property investment and the relevant funding mechanisms have started to adapt – rather than run the risk of dying.

Calum Bruce is quoted as saying that demand for UK commercial property investment is consistent and that “yields remain firm”. Mr Bruce manages the £237m, Ediston Property Investment Company, so he has some experience under his belt.

He continues by pointing out that Brexit is a catalyst for change. These catalysts appear consistent whether they are initiated by political uncertainties such as Brexit or other economic change.

The key to the approach has been the opportunity that comes with the change. It certainly isn’t rocket science that Brexit will bring change. Nobody is arguing that.

As the day gets closer that the UK effectively shuts its doors on Europe, some investors are erring on the side of caution.

Although this may be understandable, their reasoning can be emotive rather than pragmatic. There will always be a demand for business premises.


UK Property Finance

The UK property sector survived a hefty blow when the Brexit vote clarified that the UK will leave the EU. Despite this, nearly two years later, yields have proven to be resilient through the first quarter.

There is nothing to indicate that property markets are going to take a step back. It is rather interesting to note that the public markets are experiencing more volatility.

Adaptation to the changing market and how it is financed will produce winners both pre and post-Brexit. Open-ended property funds that were forced to suspend trading for a short period after the vote have shown recovery.

The consensus is that UK property finance in London will be hit the hardest. It is also likely to seep deeper into the UK, also affecting other cities such as Birmingham and Aberdeen and Edinburgh in Scotland, although less so.

It will be interesting to see whether Brexit catapults property growth in a preferred UK location outside of London, and if so – where.

Brexit can’t take all the blame for continuing change in the property market. The influence it has had and will continue to have is undisputed.

Additionally, even though lifestyle changes have affected commercial property needs, businesses continue to need premises.


Business Need for Premises Will Continue

The type and location of business premises have started to evolve. The evolution of spending habits by the general public means that there is more demand for retail warehousing.

There is an increase in remote working and a workforce that increasingly works from home. This may have reduced the total office floorspace in demand, however, companies still seek out long-term leases that provide stability.

Those that offer UK property finance and those that invest are now shying away from shopping centres. They are exploring how changes in public spending habits are influencing the demand for the buildings that we use.

Retail warehousing is now an excellent investment. High retail property overheads and the consumer preference for click and collect services have spurred growth in retail warehousing.

Consequently, there is a growth in retail warehousing investment. Online shopping, notably in the fashion retail sector, will continue to grow as people are able to order and return items with equal ease.

Sectors of the property market, including those that embrace technology, are set to prosper. The influence new tech has on the changing demands of the commercial property world is changing the property investment landscape.

property developers

How Property Developers Survive a Recession

It is noticeable that when a significant recession hits, property developers are amongst the first casualties. That said, there are some developers that simply seem to be able to manage the storms that economic cycles bring.

The first question that comes to mind is, why is it that some developers survive economic turmoil and others don’t? Some peer-reviewed studies suggest that there are two factors that influence survival.

The first is short-term contingency planning and the second is medium to longer-term planning. After all, no one can be absolutely sure how long a recession will last.


Short-Term Contingencies

The controlling management of a property development company has to make sudden short-term contingencies to ensure the immediate survival of their business when downturn is sudden.

A downturn could be caused by sudden political unrest or economic incidents that happen abroad in markets that are not always closely scrutinised.

When this happens and financial institutions themselves face serious risk, so do the businesses that depend on them for continued funding.

The studies show that those companies that acted quickly to reduce overheads managed to survive. This included reducing staff and other operating costs, selling off project stock to reduce costs – sometimes even at a loss, and changing the way the business invests in future projects.


Longer-Term Plans for Property Developers in Recession

Most of the companies that have survived recessions (and some have been around long enough to survive several) have managed to alter their long-term strategies to accommodate the economic climate.

Evidence suggests that this is the key strategy for long-term survival. There is always a market for property developers even in a downturn. How they access their market is what makes the difference.

The other noticeable strategy is the implementation of diversity. There are developers that suddenly find themselves with stock that they cannot shift because lending has become a closed market.

Those that survive complete these projects and will rent their development property for a survival income while they wait for buoyancy in the market to return.

Others will sell off their stock and research where development opportunities still exist, possibly in low-cost housing or commercial development. A well-known Irish development company simply moved their development activity abroad when Ireland was hit by the recession of 2008.

For all these businesses, some key factors came into play. They found a way to offload stock that they couldn’t shift. Even if it meant renting it out until they could. They looked for alternative opportunities in the local market and where these weren’t viable, they took their business abroad.


Property Development with Flexible Contingencies

The single greatest fact that stands out is that those that survived all had one characteristic in common. Flexibility. When trouble came, they faced it without applying a single rigid business mindset.

Developers became landlords to survive for a short period. Others changed the type of development they invested in. Yet others sought out development opportunities elsewhere even when it meant finding a developing market abroad.

Twentieth and twenty-first-century economic cycles have delivered some real lessons to property developers and speculators. The primary lesson being that to have a contingency that involves flexibility will almost certainly ensure survival.

Any development project that can be turned over to meet alternative economic needs will contribute to survival. It may, however, mean that the project must face other risks such as overrun in time and budget.


Surviving Brexit

The key question now for developers all over the UK, Scotland, England, Northern Ireland, and Wales is whether Brexit is going to bring with it an economic turndown or the opposite – an economic boom.

Either way, flexibility in the approach as to how the project can be turned over in the event of a crisis will determine who survives and who does not.

buy to let

Significant Buy to Let Changes from Aldermore

The buy-to-let market has experienced the implementation of significant tax-related changes. The changes have created problems mostly for individual landlords.

It has also reduced the introduction of new speculative landlords to the property market. Individuals are now discouraged from developing large property portfolios unless they form a limited company to enjoy the tax relief available.


Company Landlords Benefit from the Buy to Let Changes

The market has been waiting for a change to provide additional relief to both developers and buy-to-let landlords. Aldermore the specialist buy-to-let financiers have responded to the need by introducing new, more flexible mortgage products. From 23rd April, company landlords have been able to access the company’s more flexible mortgage products. These were previously only available to individual landlords.

The bank has reduced its early settlement fees. Furthermore, it is now offering remortgage products that don’t bring legal, product, or valuation fees with them. This fee structure makes a difference that will offer an impact to all their clients. Additionally, there will now be reduced rates to mortgages for multi-unit freehold properties and HMOs.


Competitive Rates

Rates start at 4.38% for the HMO and multi-unit freehold properties. This is for a two year fixed rate product and 75% loan to value. They have also reduced term variable rates across the range of their products. Some rates start as low as 3.28%. Their new remortgage products also enjoy no product, valuation, or legal fees either.

Aldermore is also rewarding their existing customers. Multi-property mortgages with discounted rates are available for those that have been loyal customers. Clearly, it pays to stay. New customers that submit a second or subsequent application or those seeking a remortgage will enjoy these products too.

They have also made it easier for landlords that have only recently started trading. Only one year accounts will now be necessary for those that are self-employed. A reduction in early repayment charges makes the offer even more attractive.

Aldermore’s commercial director of mortgages, Charles McDowell, says, “The sector has experienced significant change recently. So we regularly review our products to ensure we continue to support a broad range of customers. No matter how big or small their portfolio is”.


Technology Changes Improve Accessibility

Their own research has indicated that 41% of landlords intend to increase their portfolio over the next year. Interestingly, 15% of those that are not intending to expand will still seek to remortgage some of their properties.

Aldermore clearly understand how making changes to their products not only supports the industry but their customer base too. Focusing not only on financial accessibility but on technology too, customers can access their mortgages from their mobile phones too.

From April 23rd, brokers have been able to access their portal, get a quote, or submit a decision in principle from any device. This facilitates quicker decision making and access to the finance in a market where circumstances change really quickly.

property development funding

Property Development Funding Alternatives for Industry Growth

Property development is driven by economic growth. Ironically, property development also drives the economy. Healthy economies are able to sustain this growth. It’s when there are catalytic changes that create uncertainty that property development funding experiences problems.

What’s more, some development projects can take years. When unpredicted catalysts change the face of the marketplace radically, property development funding that is staged can face risks.


Types of Property Development Funding

The property development market experiences slumps and growth in line with other economic indicators. Property developers that prepare for economic fluctuation are the ones that survive them. The way that they access property development funding will be different based on the prevalent economic climate.

Few developers will ever seek funding from high street banks. It does happen, but most developers will seek out traditional resources to the industry. This usually includes private lenders and specialist businesses that lend based on high returns. As the online funding tech age advances and develops greater maturity, crowdfunding and online funding resources have started to emerge.


Alternative Funding Resources

Alternative funding is something that both new and established developers look for. Choices in funding will be based on accessibility to traditional funding, the availability of traditional funding, and the state of the market. Investors that understand economic cycles are sometimes prepared to wait to enjoy a return. There are different kinds of development funding available.

Because every project is going to be different, the approach to obtaining finance will be different too. If the property for development is going to be purchased at auction, then seeking out auction finance will be a critical factor.

Usually, the developer will have only 28 days to settle the payment after the hammer has fallen at auction. The developer will usually have a good idea where they will get the finance and may even be able to obtain a decision in principle. By approaching a reputable broker before the auction, a developer will be able to complete the process more quickly.


Multiple Sources

Larger developments typically involve multiple sources of finance. These include inter alia, auction finance, mortgage finance, mezzanine finance, and bridging loans. Finding a broker that can source all of these types of funding is important especially when time factors influence the success of the deal.

Although crowdfunding is becoming more popular, it is advisable to seek the advice of an experienced broker. There will be projects that this type of funding is appropriate for. There will be projects that can integrate crowdfunding and mezzanine finance or possibly crowdfunding and mortgage finance.

Speaking to an experienced broker such as Sam Hoban at Belgravia Property Finance, developers are able to determine the best route to take. It is important to get professional advice before a development project is launched, however, should the project experience additional funding needs, professional brokers can help close the gap.

Irish property development financing

Time Is Ripe For Irish Property Development Financing

There is so much going on in the Irish property world that it is quite difficult to know where to start. Barely two months into the year and the Irish property journals, blogs, and newspapers are all brimming with a positive outlook.

Irish property development financing is now a viable short and medium-term investment. That doesn’t mean that there are no problems in paradise, but overall, Irish property is doing well.

All the activity, growth projections and the Government announcements relating to infrastructure investment indicate that Ireland is the place to be at least for the next decade.


Faith in the Future

When the government puts forward its plans to make a substantial dent in the housing shortage, things begin to change. This is exactly what has happened in Ireland.

Towards the end of 2017, the Bank of Ireland announced that it would be providing €1bn for property development in the Republic. This kind of approach fuels the optimism in the market countrywide.

This is more than four times more than the €250 million that was made available in 2014. Definitely signifying a substantial shift in development confidence.

After the tracker mortgage debacle, the Bank of Ireland has continued to identify accounts that will enjoy redress. This means that 14,500 customers have now been identified as having been impacted by the problem since 2010.

And an additional 6,000 customers having been identified for redress. This shows that there is good faith in the property industry and the banks are working hard at said redress.

The bank has now adopted a policy where proper home building strategies will be encouraged and financed, rather than the land hoarding of the past which may have contributed to stagnation in the property development industry.

Property development financing has already included the financing of over 3,500 housing units and 1,500 student beds. They have clearly positioned themselves to grow this area of their portfolio.


Government Investment in Infrastructure

The Irish government has allocated a €116bn investment into future infrastructure including housing, health, and environment. This has been planned over the next two decades.

Private industry is therefore taking the cue for a surge in the market. With the knowledge that new infrastructure will be built by the government, private business is now prepared to get on the bandwagon.


Dublin – Roads Paved with Gold

Recent figures indicate that Dublin commercial rents are now as much as six times higher than they are elsewhere in the country. They are also rising and expected to reach an increase of between 5% and 6% during 2018. Prime industrial rents are expected to rise by as much as 7% across the capital.

During 2017, there was a record uptake of commercial property leasing, especially offices, indicating an increased demand. The domino effect that can be expected from this is a kneejerk reaction coming from industry to prevent a shortage and any related crisis this may precipitate.

The jury is still out on whether office space will continue to be scooped out or whether vacancies will increase. Property professionals don’t agree on the details. Quality office accommodation is expected to increase in demand even if overall occupation decreases.


What This Means For Irish Property Development Financing

The ongoing growth in the Irish property market has been fuelled by government investment. This is an indicator that development opportunities will abound over the next few years. It can be expected to continue almost certainly for the next decade.

Catapulted by the government’s commitment to invest, Irish property development financing is likely to become a catalyst for the privately funded market.

Access to investing in the Irish property development market does not need to be difficult. Sometimes, when gaining access as a UK investor, hurdles can be experienced. It doesn’t really have to be once the property development financing has been arranged.

This is usually sourced and managed by an experienced, resourceful, and reputable broker or financial advisor. Belgravia Property Finance has an excellent network of both investors and financiers who offer private finding. Whether you are looking for a mezzanine loan, Irish property development financing, or Irish bridging loans, Belgravia are the people to speak to.

Property development loans in Dublin

Market Growth – Property Development Loans in Dublin

The devastation that the 2008 crash brought upon the Irish property development market is no secret. In fact, there were conversations about whether it would ever recover.

Of course, there are half glass full and glass half empty people. The dire impact on the Irish economy did, to some extent, feed the pessimism of the glass half empty folk. The availability of property development loans in Dublin are now emerging as new growth is stimulated in the recovery.

Irish Recovery from the 2008 Crash

The Irish government nevertheless displayed a spectacular courage and strategy to resolve the economic crisis of the time. In fact, the admirable recovery is often cited by economists worldwide about to do something right.

The one very evident consequence was the stagnation of property development in the immediate aftermath of the 2008 crash. This lead, in subsequent years, to a high demand for property simply to accommodate population growth and movement.

Together with the progressive recovery, the Irish government empowered the property development loan as a phoenix rising from the ashes. Although there are slight fluctuations in growth, the Irish property market remains promising. Property development has again become a favourable investment.

UK Political Activity

It could be argued that political activity across the Irish Sea, such as the UK referendum on Brexit, has influenced this growth even further. Together with Ireland’s apparent political stability, the capacity of her government to lift the country out of economic crisis and ongoing growth, Ireland is becoming a favourite investment location once again. The demand for property development loans has resurfaced in the Irish Republic.

Demand for Property Development Loans in Dublin

Mainstream banks continue to have stringent criteria that will sometimes exclude property developers that need more flexible lending. Irish property developers continue to look for funding outside the high street and private funding has become available again.

Funding for commercial and residential property development loans in Dublin is reaching new levels in terms of demand. This could be because the proximity to the UK makes Ireland an attractive investment without all the speculation surrounding the Brexit process.

Ireland desperately needs an increase in available property. As developments increase, the demand for property will grow, fuelling the development market. There are those that argue that the uncertainty in the UK will have a negative impact on Ireland. Thus far it seems that the opposite effect has taken place.

Property Demand and Price Increases

Ireland needs more homes than it has available. There is substantial government sourced funding available for social housing. There is also a clear demand for private investment in property development loans.

The rise in house prices is indicative of this growth and the expected continued growth over the forthcoming years. If anything, Ireland is set to boom. Those looking for a way around the UK departure from Europe will look to their closest neighbour for resources and business growth.

Get a Good Broker

Experienced brokers are once again able to source some of the best Irish Property development loans in Dublin for investors seeking to develop and make a sound profit on property development. It’s a win-win situation for both the borrowers and the lenders. Even while mainstream banks are avoiding being drawn into the demand.

Belgravia Property Finance can source funding for developers and refer excellent development prospects to private financiers. With exceptional experience and a sterling reputation, they are a really good choice for advice and support.


Asset Finance – Exploring the Diversity of Lenders

Every business experiences cash flow problems in its lifetime. For small and new businesses, it quite often happens early in their lifetime. Established businesses will occasionally experience problems with liquid cash.

This is not necessarily a reflection on the financial health of the business. Rather, it reflects the economy surrounding the business. There are multiple reasons why asset finance may be the best option. When there are healthy assets to secure a loan quickly this may be ideal.

There may be a merger, or a company may need to finalise an acquisition quickly. Asset finance may then be the best available option. Lenders are less likely to falter when a loan is secured on strong assets and asset finance can be made available quickly. Loans provided as asset finance also have lower interest rates because the risk of loss is substantially reduced. They offer a secured risk, whereas an unsecured loan will cost more.


Asset Finance and Borrowing Costs

The cost of issuing shares or bonds can be prohibitively expensive and take longer. Raising funds through the securities market is also difficult, especially if time is a core factor.

Additionally, asset finance is secured on assets that have not been secured elsewhere. If they have been, usually the other lender will have to agree to subordination. This is often not a quick option and therefore why secured asset finance is easier to obtain.


Finding Asset Finance Lenders

A simple Google search returns list upon list of lenders that may be willing to explore and offer asset-based finance for you. Rather than simply approach each lender individually, it is best to use a broker and financial specialist to do this for you. Brokers have special relationships with their regular providers and they are also likely to negotiate better terms and rates for you.

There may appear to be a sea of funding resources out there. Remember this. Every lender is different as is every borrower. Some lenders will only provide finance for businesses in certain sectors. Assets may seem ethereal to some lenders, especially when it comes to tech companies with software assets.


Different Types of Asset Finance

Asset finance can also involve seeking funding for specific assets. There are more lenders available for this type of asset finance. Companies may want to fund new vehicles, manufacturing equipment, or even increase their tech footprint. Lenders secure the loan against the asset. In some cases, they will provide a lease agreement for a set period of time and provide the lease for the company after they have funded the acquisition of the asset.

Renewable energy and aircraft are popular new acquisitions that can be funded against current assets. Healthcare equipment and the agricultural sector can access asset finance too. It all boils down to finding the right lender.

Brexit fears have not affected the UK’s internal asset finance industry in the way that some forecasters suggested. For most in the UK, it is business as usual. There will always be business to be done, thus there will always be asset related finance made available.

This type of finance cannot be secured for startups. Lenders want to see a stable trading history. There is a clear requirement of at least two years trading to be in place before any lending can be considered. Once a business has a stable history of trading and can show consistent goodwill, asset finance should not be out of their reach.

Belgravia Property offer borrowing advice in all areas of unconventional finance and will help your business find its best asset finance opportunities. With established relationships with lenders, Belgravia is in a position to negotiate good terms and conditions as well as interest rates for you. Contact us for more information.

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