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Providing breathing space in development finance

As we continue to mentally readjust to life after the worst of the pandemic, we find the property development market at an interesting place in time. As far as interest in bridging goes, things are recovering well. At London Credit for example, we are receiving a constant stream of enquiries from brokers.

The same can be said for development finance. Investors have not been put off from acquisition for development purposes, despite the sharp increase in the cost of living, the war in Ukraine, Brexit, Covid-19, inflation and any other negative factor that pessimists have been sounding warnings about over the past months!

I believe this is ultimately because the property market hasn’t fundamentally changed. The rental market is still strong because high house prices are stopping many would-be homeowners from getting on the housing ladder and prices are high because demand continues to outstrip supply. Despite there being more factors putting pressure on the economy right now than a few months ago, investors with liquidity are still in the market for snapping up opportunities and lenders such as London Credit are continuing to help them achieve this.

In fact, an increasingly welcoming source of opportunity is coming from the impending Energy Performance Certificate (EPC) regulations: in 2025 all new tenancy agreements will need the property to have an EPC of A-C. Many landlords have decided that they either do not want to go through the time and expense required to get their properties up to scratch and are therefore looking to divest now. Investors who have deeper pockets or who are taking a long-term view of profits from the Private Rented Sector can see there is still a decent return available from buying such properties and having the relevant refurbishments done in order to meet energy efficiency requirements.

Having dealt with all the positives, the market is different in one noticeable way: projects are simply taking longer than before. There are two main reasons for this. Firstly, supply chains have still not recovered from the worst moments of the pandemic and consequently materials – many of which are also noticeably more expensive – are taking a lot longer to arrive on site than before Covid.

According to RICS Global Construction Monitor for the first quarter of this year, the impact of global supply chain shortages is seriously impeding activity across UK. During Q1, +84% of respondents reported to RICS that availability of materials is a major constraint to current activity.

The other major factor is labour. There is a distinct shortage of labourers and skilled tradespeople in the UK and as a consequence, project starts are being regularly delayed. In RICS’ report, it noted that labour shortages and access to the right skills doesn’t seem to be improving as the shortages continue to constrain the sector, with almost three-quarters of respondents continuing to highlight this issue.

While the construction sector was allowed to continue during the pandemic (albeit with restrictions), the knock-on effects of people being off with Covid are still being felt. In addition, Brexit has exacerbated the effect of shortages of skilled workers.

The upshot of all of this is that a number of developments are not meeting their exit strategy in time. Developers who had initially factored in time to market the property, for example, are often finding that while they have finished the building or refurbishment work, the delays caused by labour and supply chains issues have severely eaten into their allotted time to sell or rent out the property.

This is where a development exit bridging loan comes in. At London Credit, we’re regularly helping borrowers who have been refused refinance with their existing bridging lender. If they have a completed project, with all necessary signoffs in place, then it’s a straightforward process for us. We will also consider unfinished projects, as long as planning regulations have been met and signed off by the local authority’s planning officer. We can provide the client with the necessary breathing space to meet their exit and repay the initial loan.

The effectiveness of the Covid vaccine has allowed the UK to drop all social distancing regulations and the relief is palpable. While there is a view that things will never be exactly how they were before the pandemic, we are slowly but surely reclaiming our lives, both in a personal and business capacity. In our sector, specialist lenders have the appetite to lend, even if the high street banks may not; we want the market to get back on track and are playing our respective parts. One keyway is by helping clients who have been hit by delays which were from no fault of their own. Brokers should talk to their clients and see if a development exit bridging can help them.

14 June 2022


BestAdvice fires the questions at Marios Theophanous


At London Credit we have announced a substantial year-on-year improvement in our completion times.


We have increased the maximum LTV on our residential loans from 70% to 75%.


Brokers with clients looking for higher-yielding assets investments should talk to those bridging lenders who operate in the semi-commercial space.