FINANCE & INSURANCE 39 R
egardless of snap elections and Brexit, there’s a bigger underlying issue at the heart of our economy – the British housing market remains chronically undersupplied, and has done for the last two decades. Various figures are bandied around, but
many agree that around 300,000 new homes need to be built each year to cope with demand, even if net migration were to fall substantially.
There has been some improvement. In 2015-2016 almost 190,000 net additional homes (including 164,000 new builds) were created, but even this is 15 per cent below the 2007-08 peak. With still only about half the necessary homes being built each year, this situation is only likely to worsen before it gets better.
For the past decade, SME housebuilders and developers have had a particularly tough deal. Between 2007-2009, with the financial crash heavily affecting businesses, a third of small companies ceased building homes. Over half the country’s new builds are built by just seven PLC housebuilders, who have the scale, finance and synergies to dominate. It’s a tragedy that, along with the usual challenges of red tape and bureaucracy, many lenders simply shut their doors to small and medium housebuilding companies, scared of their own shadows and that of the regulator. LTVs (loan-to-value mortgages) have been wound back, and policy U-turns continue to be a problem.
300,000 NEW HOMES NEED TO BE BUILT EACH YEAR TO COPE WITH DEMAND
Decision making in the UK is slow, inefficient and dysfunctional, and time drags on – time delays being a house- builder’s number one enemy. Now we have the rising cost of imported materials (thanks to the drop in sterling) and the fear that one in four construction workers could be lost from a ‘hard’ Brexit. With short term sentiment fluctuating as every piece of Brexit news is aired, it’s plain to see that housebuilders are continuing to face some challenging circumstances, and it’s the job of land and build funding companies to help them as a strategic partner. The Government continues to meddle with the sector by way of its tax and regulation obsession and recent changes to stamp duty, including a second home buyers tax. It’s in this sort of environment where housebuilders and developers in need of finance, must seek out a fast, flexible and compliant alternative to the mainstream lenders that are of poor quality and are often inefficient.
WWW.HBDONLINE.CO.UK LENDING A HAND
With UK builders failing to keep up with demand, Mark Holden of Go Develop offers his view on how financiers can help SMEs reach Government targets.
Most banks simply don’t understand the essential partnership of developer and funder. From a ‘computer says’ mentality to an over-reliance on a less-than- perfect credit records, hurdles such as these can leave a great new build project dead in the water, with banks applying the selective amnesia that they are so well known for.
Since the credit crunch, mainstream lenders have been slow to return to small-scale development finance, if they have returned at all. Many focus on a developer’s history as the be all and end all – ignoring both the merits of an individual build project and the fact that even the best developers can have setbacks over the years.
For specialist funders that know
property and ignore macro-economic noise, the playing field looks different. Free of the capital restrictions and overhead costs that banks have to contend with, they can offer tailored financing that fits. The possibility is there to select companies who offer unique solutions to funding, such as supporting their partners with 100 per cent LTV full funding for all land and build costs. The best companies will cover all a developer’s soft costs and SDLT.
It is important to choose a reputable company that can consistently guarantee funds on time, with a fast and fuss free nature that’s easy to do business with. This ensures developer partners can do what they do best: crack on and develop. When working in partnership with a
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