Bridging development loans up 22% in Q1

Michael Lloyd

July 3, 2018

In Q1 2018, there was a 22% increase in in bridging development loans since the previous quarter, with members of the ASTL lending £386.1m worth of development loans, of which £242.2m were categorised as bridging.

This further highlights the crucial role of the short-term lending market in supporting the property development sector in the UK.

Terry Pritchard, director at Charterhouse, said: “There’s a lot of development bridging finance at the moment and a lot of planning applications.

“We’re still a nation looking to build. I’ve seen lots of application for bridging, mostly for new build. There’s lots of business, however it’s not all good quality.”

Chris Dawe, sales director at brokerage LDNfinance, said: “This is certainly a trend that we have seen. This is mainly linked to the reduction in mainstream buy-to-let and standard property investments due to lender criteria and tax changes.

“This has prompted the clients looking to invest in property to move their focus towards alternative investment property propositions which may involve reconfiguration, refurbishment or renovation.”

Property development bridging loans are a method of obtaining short-term finance in order to either secure a property or refurbish with the intention of adding value.

These development loans exclude what is generally termed “light refurbishment”, such as the addition or renovation of bathrooms, kitchens and conservatories as these generally do not require planning permission or extensive structural changes.

Harry Hodell, senior originator at Fiduciam, said: “There is a evidenced shortage of housing throughout the UK, so increase in development bridging loans comes as no surprise to Fiduciam.

“The market demand for competitive short term funding options, remain high and although improving, funders providing competitive bridge development products are some way off meeting the demand out there.

“We expect this figure to continue growing as SME’s become more accustomed to using alternative financiers and aware of the wide range of bespoke lending available to them.”

Benson Hersch, chief executive of the ASTL, said: “The role of small and medium building firms are seen as crucial in helping solve the housing crisis but access to finance still remains their toughest barrier to overcome.

“Whilst SME building firms continue to be locked out of mainstream channels, they will increasingly rely on different sources of finance such as short-term funding solutions. These alternative forms of finance are providing a solution and allowing small developers to play their part in housing delivery.”

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