The Property Development industry is growing at a rapid rateMake Text Bigger
With the UK continuing to recover from the losses suffered during the recession, the Property Development industry is currently seeing one of its fastest growing times. The demand for property has significantly risen in the first half of the year with construction of over 100,000 properties commenced in the first half of 2014.
There are plenty of opportunities for developers, who with the right project, at the right location, will receive excellent returns on their investments. Particularly developers interested in house building which is currently the best performing area of activity in the construction market, with average house prices rising 12% from April to June.
Most property development projects are extremely well designed and structured. However the financial side of these projects, in the majority of cases is the real issue and although High Street Banks are still hesitant when it comes to lending, there is a variety of alternative lenders in the market whose appetite for development projects is strengthening. Lenders will always look at how profitable the investment is in comparison to the risk taken. For this reason it is extremely important to provide the lender with detailed and sufficient information, in order to reduce the complexity of the decision process.
The good news is there are skilled brokers in the market, who with their expertise will know how to successfully present projects to relevant lenders and at the same time obtain the best available rates and financial solutions for clients.
Commercial brokers also understand that the outcome of this process must always be beneficial for both the lender and the client. For this reason it is important to mention that every lender’s appetite is different. There is a financial option for most developers out there fortunately, and experienced brokers will carefully approach relevant lenders, taking into consideration the developer’s experience and complexity of the project, as well as lenders criteria and rules.
There’s a feeling in the market that there bis a lack of finance for property development projects. The truth is, there is a lender out there that will be willing to provide finance for most type of projects. This is the right time for skilled developers to start running their projects by getting the right help and subsequently provide the country with a much needed boost in the levels of supply for property.
I have listed for reference below some of the basic criteria lenders are looking for, but do remember every lender is different and every loan is bespoke to each project:
- Loan to costs 60% to 75% and up to 90% with additional mezzanine finance or 100% if other security is available
- Loan to GDV (Gross Development Value) can be up to 75%
- Minimum loan sizes typically £50,000. Maximum no limit.
- Planning permission is normally required prior to draw down, but we do have lenders that will lend on land without planning.
- Exit strategy can be sale or re-finance onto a term mortgage.
- Time scales for development loans – some lenders limit it to 12 months but generally 18 – 24 months.
- Lenders do want experience and the cheaper the rate the more experience is required.
- It is not necessary to own other property
If you need assistance with any type of commercial property finance just complete the form below and I will be pleased to assist.
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