Housebuilding under pressure – short term lending to developers now even lower than post-recession

• Banks slow to lend to developers
• Alternative finance providers e.g. P2P good option for projects

Short term lending to get vital housebuilding projects off the ground, is at an even lower level than it was at the height of the recession, says Saving Stream, the P2P property funding platform.

Saving Stream says that £67.4 billion in short term loans was borrowed by developers last year – compared to £68.2 billion five years ago in 2010/11*, as more banks withdraw from the bridging loan market.

Saving Stream says that bridging loans are a vital first stepping stone for many housing developments, so they can move on from the planning stage towards completion, as they allow developers access to vital funds in the intervals between transactions.

Saving Stream suggests that the issue was likely to be exacerbated by post-Brexit crunch in lending, which has led to some banks to become more cautious in their lending. For example, one of the largest challenger banks has recently announced it will no longer provide bridging loans.

Even amongst those banks still doing bridging loans, developers are finding it hard to access the necessary short term funds for their projects quickly enough, as banks can take up to three months to make decisions regarding short term loans.

Why are bridging loans used by developers?

• To allow access to funds in the interval between a sale of a current property and completion date on the purchase of the next
• To ensure that payments are covered on properties whilst the developers waits for planning permission

To enable property buyers at auction to have quick access to funds for deposits- these are needed immediately in order to secure the purchase

Saving Stream suggests that developers need to look for alternatives to bridging loans that will allow them to operate on a sensible timeframe and encourage property development.

Liam Brooke, Co-founder and Director at Saving Stream says: “Demand for housebuilding as a result of the housing crisis is massive, meaning opportunities for developers are extensive.”

“The housing crisis has meant that investors need to secure opportunities for potential projects in a very tight timeframe, as competition can often be intense.”

“There has been an influx of foreign cash buyers looking to invest in the UK property market, and for developers the speed of their investment can often be the make or break.”

“Although bank lending can often be too slow – there are other options available. Developers are increasingly considering alternative financing, such as P2P, in order to meet the strict time constraints of their projects.”

P2P lending to the property market can help investors, as well as developers, as it increasingly plays an important role in the UK economy.

Liam Brooke says, “Investments into these types of platform are starting to encourage vital housing development, and allow good returns for their investors. The projects are credit worthy, low risk and are a strong option for investment.”

“They allow small investors entry into the property market, and help them to build up more diverse investment portfolios.”

About Saving Stream

Saving Stream is Europe’s largest secured P2P lender, providing property finance and development loans. Since it was founded in 2012, it has provided an annual return of up to 12% to its investors. Over 11,000 individual investors have earned a total of £13 million through Saving Stream, and more than £200 million of funds has been provided for property investments.

Your capital is at risk. Loans are secured against the property with a legal charge, and loan amounts never exceed 70% of the properties’ Open Market Valuations undertaken by independent valuers. Saving Stream only participates in secured lending and holds unallocated investor funds in a segregated bank account. A substantial discretionary provision fund is maintained to assist in making up any recovery shortfalls. Saving Stream is regulated by the Financial Conduct Authority (No 622666).

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