6 things you need to know about bridging and development finance5th November 2015
Yesterday Rangewell attended the 2015 Finance Professional Show. In between catching up with many of the lenders on our platform, we caught the panel on bridging and development finance (a topic we’ve touched on here before) where four bridging and development finance professionals told us what the market’s like now, and what to expect in the future. Keep reading for an insider’s perspective on this swiftly-evolving sector.
1. Development lenders have special skills
Bridging finance providers have a broader knowledge of the entire market, but if you need specialist knowledge and experience, get a development loan. Regular bridging finance can be suitable for simple refurbishment projects, but new builds and more complicated scenarios call for specialised development funders. It’s also important to note that often what appears to be a simple refurbishment can quickly turn into something more complicated and time-consuming – and you might find you’ll suddenly need the knowledge a development funder could provide.
2. Nobody really knows how much the market is worth
All the speakers agreed that there’s no single reliable data source for the value of the development and bridging finance market as a whole, but their estimates ranged from £2-3 billion.
3. Challenger banks aren’t posing as much of a challenge as you’d think
Challenger banks have definitely been getting more involved in the sector, as they have been in all areas of SME lending. Despite their growing influence, however, the panelists didn’t see much competition. They pointed out that banks always have tighter constraints and regulations that don’t affect smaller lenders, and as the niche lenders are at the higher end of the risk ladder, they can take on the riskier projects that make the banks uncomfortable.
4. It’s a popular market, but there aren’t too many lenders – yet
One feature of the property finance sector is that there are very few barriers to entry, so the number of lenders in the sector is always increasing. But those in the industry don’t feel like it’s quite at the saturation point yet, because…
5. More regulation means more business
Increasing regulation is going to mean more and more bridging and development finance providers dropping out of the game. That means more business for those who are aligning themselves properly with upcoming regulation.
6. The future’s looking good
We’ll be getting strong growth throughout the next 12 months, with the market increasing by as much as 50% year-on-year. And a lot of this expansion is going to occur outside of the saturated market of London and the southwest. Things are good for now, but keep an eye on the horizon – one panelist noted that the market is currently overvalued by 30-40%, so interest rates will definitely be going up. Be prepared.
The Bridging and Development Finance panel was chaired by Russell Martin from Finance 4 Business. The panelists were James Bloom from Regentsmead, Robert Orr from Titlestone Property Finance, Keith Aldridge from Amicus, and Mark Posniak from Dragonfly Property Finance.
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