The development market has rarely been as vibrant as it is today, and it’s not hard to see why. The housing shortage is as pronounced as ever, demand for new homes is holding up given strong employment and continued low borrowing rates, and the market is awash with specialist lenders keen to get money into the game.
To top it all off, the prominence given to housebuilding in the Autumn Budget, with 300,000 new homes per year the target by the mid-2020s, has given residential development even more momentum. And with the supply deficit acting as a hedge of sorts, we’re seeing increased activity in every corner of the UK.
In its latest House Price Index, Nationwide chief economist, Robert Gardner, singled out office-to-resi as a particular catalyst of much of the activity taking place, observing: “It is ‘change of use’ of buildings – from shops, offices and other commercial purposes, to homes – that is providing the biggest boost, driven by a shift in government policy.”
A growing number of the enquiries we receive more generally relate to development finance of some kind.
All in all, this is a sector that brokers really should tap into during the course of 2018. And best of all, property development is a channel that can deliver multiple bites on the cherry for brokers in relatively quick succession — in that sense, it can be a serious revenue generator.
After all, it’s not unusual for a developer to seek an acquisition loan to purchase the land or property they want to develop, and then, once planning permission is in place and all the surveying, scoping and costing been carried out, refinance away to a development loan, where payments are phased in according to progress.
And even that’s not the end of the matter, as once the project is complete and the marketing of the units in progress, a growing number of developers are switching onto a cheaper development finance exit loan. By this point the hard work has been done, and a lot of the risk mitigated.
The good news for brokers is that they can play a key role throughout this whole process, working with specialist packagers for the lifecycle of the development to keep costs down for the client. Their reward is the often sizeable commissions that arise from this kind of finance, and the regularity with which they can occur.
Mark Dyason is managing director of Thistle Finance