When you have a Government, prior to the election, publishing a White Paper calling the UK’s housing market ‘broken’ then you would expect some serious thought to be given to how it should be ‘fixed’.
Indeed, if you looked at the manifesto pledges of the main political parties there was something of a cross-party consensus that the days of ultra-low numbers of new housing coming to market should be consigned to the past. Of course, as is their wont, those very same parties differed (often greatly) about the methods and means they should employ to increase supply; indeed they differed about how it should be funded, who should be building the houses, who should be able to buy them, how much they should cost, and what type of tenure they should be for. You didn’t think this was going to be a straightforward question to answer, did you?
However, there is a crumb of comfort here, and it’s the fact that there was a widespread political debate going on during the campaign which focused on plans and schemes for the future. Interestingly, the current lack of housing supply across the board has had a tangible influence on the work of developers and their finance needs when it comes to the properties they have in their portfolios.
As we stated recently, in quarter one this year we saw a very large increase in the number of development finance enquiries we received – up 72% from the previous quarter, to a point where those enquiries make up 16% of all those we get. There are obviously a number of reasons for this but one clear one is the focus developers are placing on ensuring their properties are up to scratch so they can bring them to market quickly and add to the much-needed supply of housing needed.
Now, in many cases we’re not specifically talking about homes which might be deemed ‘affordable’ for the majority – in fact we’ve conducted some very large loans recently for high-end property development – but there are undoubtedly developers who are seeing the lack of supply in this market, are running the rule over the properties they have in their portfolios, and are seeking the necessary finance to move them onto the sales market.
The problem is of course, particularly for advisers who may not be well-versed in this sector, that these tend to be specialist requirements for complex arrangements, and not having that up-to-date feel or influence with the lenders concerned can be an issue. Our recently appointed Head of Structured Finance, Elliot Hyames, called the sector ‘inconsistent and complex’ – which is the truly the last thing you want to be with a client seeking development finance.
Because of this, there are specialists out there like ourselves, who will handle the whole process, sourcing, packaging and arrangement for advisers, allowing them to concentrate on their core advice offering safe in the knowledge that their client is being looked after in the right way, and they are securing the fee they would have achieved if they’d been able to go direct.
Overall, even with the promise of much greater Government intervention, I suspect the full housing market ‘fix’ is a long way off – we may not get there for a generation given how far we are behind the required numbers, or we may never get there. However, it’s certain that developers will continue to want to bring their properties to market – especially at a time when those properties are a scare resource – and therefore advisers should expect more clients who will be looking for a top-quality, specialist development finance service. If you’re unable to deliver in this area, make sure you partner with a business that can.
