Mid-sized property developers are set to borrow more from specialist lenders


property developers

New research with mid-sized UK residential property developers, who collectively build new homes worth around £1 billion a year, reveals that over the next three years 92% expect the level of funding they source from specialist property finance companies will increase – with 12% anticipating a dramatic rise.

The main reason for this is because property developers expect traditional banks will become less willing to lend due to concerns about a property price correction, as well as concerns regarding the state of the economy.

However, they also say it is because specialist lenders offer more flexible terms and conditions, which is becoming increasingly appealing in the current environment, and that more are entering the market.

When asked about the current level of funding they source from specialist lenders, 40% said up to 25% comes from them, 36% said it is between 25% and 50%, and 24% said it is higher than this.

However, regardless of where their funding comes from, 72% of property developers agree that it is becoming harder to secure funding for residential property building projects because of concerns regarding overall costs rising dramatically and budgeting becoming harder.

Parik Chandra, Partner and Head of Specialist Lending, Downing LLP said:

“Our research suggests that specialist lenders will take a growing share of the residential property funding market.

To date, we have committed over £300 million to medium-sized residential property developers, with around £140 million achieved in the last financial year.

However, regardless of where they source their funding from, in the current market developers need to do more work in preparing comprehensive plans and budgets that they can share with prospective lenders.”