03 Jan Property Development Finance In A Flatlining Market
For most property investors, flatlining property prices can be a sign of a tough road ahead. But is the current slowdown in the market expected to be a longer-term trend?
The Royal Institute of Chartered Surveyors (RICS) have identified that although the market continues to flatline, there are still some positive signs. Those seeking property development finance will not have to withdraw from the investment market. They may, however, simply have to change their approach.
The flatlining trend is clearly visible in London, East Anglia, the North, and North West. Growth, however, continues in Scotland, Northern Ireland, the South West, and the North West, development activity is picking up in the Republic of Ireland, so we see a demand for property development finance and bridging loans in Ireland.
Flatlining markets appear to be doing so because of a significant drop in both demand and property availability. Over the next year, RICS expects prices to rise again, except in the capital.
Direct Line conducted research indicating that landlords are paying more on stamp duty. In fact, as much as £6500 with every additional property they add to their portfolios.
Buy To Let Will Not Die Out
All of this, however, does not mean that investment in property will end. It will simply change to adapt to how the market is behaving.
After all, if landlords are going to exit the market, are they going to shed the properties they already have in their portfolio? And could this possibly stimulate the sales market?
The rental market is likely to increase because the availability of sales stock is so low. Therefore, investing in rental property for the long term appears to be a valid investment option.
While the value of the property may not increase substantially over the next financial cycle, the value of rents are already rising. Thus, the return on the investment becomes immediately tangible.
Just because property values are flatlining, it does not mean that a good return cannot be achieved through rental income. If the investment is being pursued for a quick turnaround then seeking out economies where property prices continue to rise is the better alternative.
Property investors may decide to move their focus to areas of the country where the sales market remains buoyant. This will mean that they will still be able to invest in development property where values continue to climb. They can do this while still enjoying excellent returns on the rental market. Even in the event of a slowdown.
Property Development Finance
Investors that are purchasing for property development will naturally look to trends where prices continue to rise in other parts of the UK and Northern Ireland. The overall economy may look rather bleak at times.
In fact, it is the micro-economies of other parts of the UK that will determine whether local investing remains viable. When an investor can still draw a decent return from a development in the North West, then this will be an explorable option.
Seeking out and obtaining property development finance may require some ingenuity. This is why you will need a top notch broker.
Property investors in the UK, however, do not have to invest nationally. They can and do look abroad for other opportunities. This would mean that borrowers will not be able to use retail banks and other mainstream lenders to obtain finance.
Property markets abroad are also influenced by local economies and, depending on the type of investment involved, is a good route to explore.
The good news is that there is property development finance available from lenders that offer finance outside of the retail lending market.
Identifying The Objective Of The Investment
Overall, identifying the objective of the investment will lead to the correct decision about whether to invest or not. This means that properties in a flatlined market can still provide a return. Don’t forget that property markets do not flatline forever either.
How you decide to finance the investment will depend on the length of the investment. It will also depend on whether the desired outcome is a long or a short-term return. This determines where the investment is made, the kind of project involved, and, of course, the way it is funded.
Belgravia Finance Brokers are experienced property investment advisors and brokers. They will be able to assist and advise on everything related to your property investment. From high net worth mortgages to bridging finance and property development finance, Belgravia has the experience and expertise to support you.