Comment


Development opportunities are ripe for the picking


“Short-term” competition is growing but danger still lurks


by fahim antoniades, group director, Mortgage Centre IFA


the start of this year more than any since the onslaught of the financial crisis saw a sense of optimism - if not misplaced hope – that things might slowly start getting better now. Already we have started to see a little more competition in the residential lending sector, as the main players start to reduce their rates and in some cases, roll out the year with higher lending targets than before. but what does this mean for the development finance sector, how has it fared over the last few months and where is it likely to go next?


InCreased demand Whilst market conditions have been generally constrained, according to a ricS survey the first quarter of 2011 saw an increase in demand for commercial construction. this has mainly been driven by the private sector and has encompassed both the commercial and residential aspects of property development, with the main engine of drive being in the South. Further evidence that things might be getting better was suggested in a recent survey by de Montford university which shows that, for the first time since the


report’s inception, secured debt on commercial property has fallen. the implications of this news is clear to see – the impact of the financial crisis is starting to wash out. one would hope that the more debt is repaid, the more likely it is that liquidity will be redistributed, as lenders slowly start rediscovering their comfort zones again. it remains to be seen how the


overall growth figures transpire over the coming months, given that the current round of public sector cuts have yet to make a definitive impact in the sector.


affOrdable hOmes the Homes & communities Agency, which is tasked by local authorities around the country to deliver affordable housing, have reported stellar results. the very latest six monthly figures released in mid- June this year, collates the delivery and supply of affordable homes under the national Affordable Housing Programme, the Kickstart Housing delivery Programme, the Property & regeneration Programme and the Local Authority new build Programme. the figures show that the agency


exceeded the outputs for 2010/11, achieving a total of 57,605 housing starts against a target of 34,982, thus exceeding the target by 65%. it’s not inconceivable then that against a backdrop of austerity measures and frugal public spending, we see a loss of appetite for a continued drive in the


development of affordable homes. this is why the news of a private sector uptake in development is a welcome one since some impending slack ought to be taken up. nevertheless, the private sector still has many challenges to face. the economy and liquidity are far from healthy and so volatility still lingers as the main problem.


mIxed messages


At the time of writing a news report came through that a small bank, the Southsea Mortgage and investment company which leant to house builders, had been shut down by the Financial Services Authority and the bank of england. it would appear that Southsea’s main lending activity was funding housing development in the local market. it would therefore have had to rely on the ability of the local market to buy off these developments, meaning its business model and loan book was geographically exposed. it had to rely on developers being able to sell back to the local community, which in turn relies on local economy supporting able and willing buyers. it would be unsurprising then that they should struggle, given the current state of the property and liquidity markets in finding buyers who are both willing and able. granted that the bank may have had some legacy issues as a result of the crisis, the case nevertheless highlights the dangers faced by small specialised lenders.


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