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With so much pressure on local authorities to build more housing, has residential development finance become easier to obtain?


Contributed by Sussex SEO
March 4, 2019



Securing affordable development finance often holds the key to the successful implementation and completion of ambitious projects. Nevertheless, property development finance has typically been tricky to obtain and even more difficult to afford. A new wave of dedicated residential property finance specialists have simplified things, offering flexible and accessible services that go beyond those of major High Street banks.

But what effect has local government pressure had on this area of the industry? As demand for quality residential properties at affordable prices continues to grow, is the result the wider simplification of obtaining residential property finance?

The short and admittedly vague answer is - yes and no.

Capitalising on UK-Wide Demand

In terms of pressure from local authorities, certain regions desperately need to accelerate their available housing inventory over the coming years.

Scotland and the Midlands in particular are experiencing a huge boom in both demand and interest from developers, with land values having spiked by up to 2% in Q2 2018. In 2017, planning permission was granted for more than 391,000 projects in the United Kingdom, representing a 21% increase from the year before.

In addition, the 50 leading housing associations in Britain have confirmed plans to build at least 250,000 new homes by 2023. This would mean a minimum of 138,000 plots of land would need to be secured for the respective developments.

Along with the significant expansion of available inventory, experts are also calling for greater variety within the new-build property market. The on-going homogeneity of product eliminates far too many buyers and investors from the equation, typically due to excessive property prices.

Across the UK therefore, local authorities are indeed facing renewed pressure to get serious with new residential property developments. In terms of how this has affected eligibility for finance, applications continue to be considered on a strictly case-by-case basis.

The Build-to-Rent Sector

Supported by institutional investment, the build-to-rent sector is growing in key markets across the UK. There are approximately 125,000 units currently under development, of which a surprising majority are being constructed outside London.

For the property developer, funding issues vary enormously in accordance with their background, their current financial position and what they intend to achieve. For some, affordable housing projects don't necessarily guarantee the returns they're targeting. For others, affordable housing projects subsidised by government grants are the only projects within their means.

Residential development finance has become easier to obtain, but it's still a case of fulfilling very specific criteria. The government is showing more generosity than ever before with subsidies and grants, but only for those who support its vision. The specialist development finance lending sector is open for business, but lends exclusively on the basis of security/collateral on the part of the borrower.

With such a complex range of options available, it's important to seek independent financial advice before making your final decision.

 

Tags: real-estate investment

 

 

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