Government should back bridging to boost supply
He was speaking in the wake of the recent West One Bridging Index which revealed that since April 2013 bridging has pumped £2.38bn into boosting property supply compared to government equity loans which contributed £941m.
Faes said: “Bridging is often an overlooked area of the mortgage market but it is making one of the most positive contributions to the whole sector.
“The government should be doing something to help bridging lenders, such as a guarantee scheme for bridging companies.
“If the government supported bridging the cheaper rates could be passed on to consumers, although it wouldn’t be politically popular.”
In January Faes and LendInvest, the peer-to-peer lender he helped set up last year, oversaw a loan of £4.12m which transformed two derelict commercial buildings into affordable flats.
He added: “If the government wanted to ease house prices it would be helping developers get funding.
“There’s such a huge supply gap. It needs to double the housing supply this year just to deal with the current demand.
Lucy Hodge, director of Vantage Finance, felt Faes has a case.
She said: “Perhaps there is something that could be done to help facilitate the loans being taken out.
“Where is the help for developers to get those houses built?
“You have funding for lending in the mainstream markets – you could argue that there is some merit for the government looking at bridging.”
Chris Whitney, head of commercial finance at Enness Private Clients, was opposed to the idea however.
He said: “I would disagree that state support for the short-term finance market should be implemented for refurbishment projects.
“I feel that the overall viability of a building as a ‘home’ should be the driving factor.
“I think the government has already signalled a political and economic desire to recycle unused buildings by allowing Permitted Development Rights on office buildings into residential in conjunction with promoting increased new home delivery.”
Faes also discussed how bridging lending is negatively perceived in the media, hindering the sector from getting the necessary praise and support it deserves.
He said: “The perception of bridging is all wrong.
“Historically it’s had a somewhat negative perception but at the end of the day most bridging is about helping property entrepreneurs who require suppliers quickly.”
In recent years bridging has been a growing sector. According to the West One Index bridging loans totalled £2.06bn to the 12 months to May on a gross annual basis, 17.9% higher than the previous 12 months.
Jonathan Sealey, chief executive officer at Hope Capital, felt that such growth goes hand in hand with an improved reputation.
He said: “In the last three years confidence and perception of the marketplace has improved.
“A lot of clients wouldn’t have entertained using it four or five years ago but now it is widely accepted.
“It used to be seen as lender of last resort whereas it’s now widely accepted.
“Developers and property investors see it as a quick way to secure deals without having to go through some of the bank channels that can take longer.”
Whitney added: “Bridging has become significantly cheaper over the last few years mainly due to increased completion in the sector, high street lenders not lending as they used to and the availability of funds from investors seeking a better return on their funds in this low interest rate environment.
“This reduction in cost and greater availability across the country means that using bridging finance for development and redevelopment is increasingly viable and being the recommended solution by advisers.”
Looking forward, Faes is positive regarding the industry’s prospects, despite gross bridging lending recording a more subdued growth rate of 0.8% per month since March.
He said: “Business is strong at the moment. It continues to grow month-on-month.
“Our view on the bridging market is bullish.
“We think the housing market has got a long way to go and any talk of bubbles is premature. The market’s starting to pick up countrywide.
“Funding for bridging companies has got a lot easier in the last couple of years, but a lot of bridging companies are still looking for better priced funding.”