The UK is benefiting from a noticeable rise in land value since the result of the election and the latest survey by the Royal Institute of Chartered Surveyors has shown a 17% increase in new buyer enquiries, rising from -5% in November, further highlighting that consumer confidence is on the rise.
In the last quarter of 2019, property enquiries and completions reduced due to the upcoming election, creating an air of uncertainty with property developers. However, Saffron Building Society are predicting a upturn in property development finance enquiries in the first quarter of 2020 as this uncertainty dissipates and developers progress with planned projects.
Development Finance offers financial support to small and medium sized developers, providing them with financial security during both the construction and sales phases. A developer seeks funding to support them through the purchase of the land and through the build process when their own personal cash may not be sufficient to fund the entire build.
Peter Owen is Head of Property Development and comments: “We have started to notice the upturn at Saffron Building Society. Our partners have told us that developers are starting to feel more confidence, which over the coming weeks and months will hopefully lead to an increase in lending applications, as buyers take advantage of the improving conditions.”
Unlike other types of lending, Development Finance requires the lender to be involved in the build plans and timelines, to provide access to specialists to guide the developer and to offer them a package that is suited to their project’s specific needs. This requires a deep understanding of the processes involved, which would not be available through a traditional business loan provider.
2019 was a year of uncertainty with property transactions and completions slowing in the lead up to the election. However, the result of the election has appeared to have had a positive impact with buyer sentiment on the rise, more confidence in the land markets and a gradual increase is being seen in values[i]. The strongest growth has been the East Midlands and East of England where two of the major house builders, Barratt Homes and Bellway, have both recently opened new offices.
A very useful guide to Development Finance has been produced as a collaboration between the Federation of Master Builders and UK Finance. This is an easy to read guide which highlights the journey from concept to completion and details how best the developer should present a proposal to the funder. Those aspiring developers who are considering applying for funding will find the guide a useful tool to aid them throughout this process.
Peter continues: “Property developers will find it crucial to partner with a lender that is not only experienced in the field, but can educate, guide and provide support in all areas of the build as required. Having worked in this field for many years, at times guiding lenders through the process, I have first-hand experience in the peaks and troughs of the process. The lender doesn’t just lend you money, they lend you their invaluable years of experience too. I highly recommend reading the guide before applying for funding too as it walks you through the entire process.”
A link to the Guide to Property Development can be found on the building society website at www.saffronbs.co.uk .Saffron Building Society offers development finance packages directly and through a network of partners. Saffron is a mutual organisation, owned wholly by its members and offers a range of corporate and specialist financing and saving solutions, all of which are available to review at www.safrronbs.co.uk where there is also a link to the Guide to Property Finance.