Short-term secured loans fund 2,800 such projects over the last twelve months with brokers now expecting refurbishment activity to grow faster than ground-up development. By comparison, equivale...
Short-term secured loans fund 2,800 such projects over the last twelve months with brokers now expecting refurbishment activity to grow faster than ground-up development. By comparison, equivalent lending totalled just £639 million over the previous twelve months to April 2013.
Refurbishment loans also represent a growing proportion of all short-term secured lending.
Loans for all forms of property improvement now represent 61% of total industry gross bridging lending. This compares to 47% in September 2013 and 40% one year ago.
Duncan Kreeger, director at West One Loans, comments: “Property is in seriously short supply in the UK. Solving the gridlock will take serious imagination – and better use of existing property.
But at the same time, finance is becoming more flexible and more suited to this post-recession world. New lending practices are gradually bringing more properties into use – those which have been empty for too long. Short-term secured loans no longer mean purely ‘bridging' between properties. Alternative lending is now much more sophisticated – able to work in partnership with property developers to get the most out of their portfolios.
New building is still significantly depressed from even its rather meagre pre-crisis peak. But this isn't the only way forward. Conversion and refurbishment are just as critical to unlocking the supply of UK property. We need to make better use of the buildings we already have.”
Considerably more brokers have seen growth in short-term secured property loans than have reported a decrease. Over the last six months, a net 43% of intermediaries report growth in refurbishment and conversions. This is almost as positive as the net 52% seeing more ground-up property development than six months ago.
However, this is soon expected to reverse. Conversions and refurbishments are set to overtake ground-up development by this measure within the next six months.
A net 57% of brokers expect growth in lending for property refurbishment and conversion, up significantly from the latest reported increase. By contrast, lending activity for ground-up development is set to grow more slowly, with 52% of intermediaries expecting growth – static from the previous six months.
In addition, intermediaries want lenders to do more to assist refurbishment projects. More than one third of brokers (36%) explicitly list property refurbishment and conversions as areas where they would like more product availability from lenders.
Furthermore, just under one-in-five brokers (19%) say they originally started to offer short-term secured loans in response to the general recovery in the UK housing market.
Duncan Kreeger concludes: “Brokers understand the frontline of the property industry – and that is a scarcity of properties coming onto the market. Finance that can actually increase the pool of property in the system has always been even more useful than loans that simply facilitate purchases. But now this distinction is becoming even clearer.
We need more homes in the places where people want to live, and more offices where successful firms can do business. In these cases prices are high and refurbishment can be very profitable. But only a handful of the most modern lenders have the flexibility and the funding lines to put the wheels in motion.”