What is the future of development finance post-2020?

by Steve Larkin, Head of Development Finance
In this year’s property-lending landscape, development finance has been one of the last forms of funding to be turned back on.
This is with good reason, the lockdown in March only ended for development sites when they could ensure Covid-secure building practises were fully implemented on site, while lenders were uncertain about the future stability of the market and slowed down or stopped their development funding altogether.
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During this period we felt it was important to pay close attention to our existing clients who were dealing with a totally unpredictable situation which could have put their developments at risk.
To meet this demand they needed:
- Flexibility: for projects close to practical completion we negotiated extensions because of Covid delays
- Speed: when sites could get working again, they needed quick access to cash, which we provided with 24 hour drawdowns
- Options: we found a few of our clients had sales fall through as a result of Covid delays, so they needed development exit finance to see them through the pause before demand returned
We also took this opportunity to focus on what our development team could do better, what back-end processes could we improve to make the front-end experience for our borrowers slicker.
This process led us to streamline internal processes to speed up turnaround times for release of funds. When sites re-opened we were able to agree with our professional monitoring surveyors to carry out video visits to ensure funds were released and for works to continue on site without delays to the borrowers labour or supply chain.
Even while our team is working remotely we have made sure that we are accessible to our borrowers to assist with any concerns that they have and to give comfort that they committed and supportive of them and their schemes.
Demand
One thing lockdown easing over the summer showed us and the market as a whole is there is still lots of demand for high-quality new housing across the UK.
It feels a long time ago now, but it was only in March where the Chancellor, Rishi Sunak, introduced a series of measures to increase the UK’s housing stock, and individuals who spent months in their homes have been keen to take advantage of the stamp duty holiday introduced over the summer which has led to record demand for property.
This demand won’t go away overnight and it is up to developers and lenders to meet that need, while being mindful that Covid isn’t over yet, and lenders will need to keep the things they learned in lockdown to keep their clients’ developments moving forward in a new era of partial lockdowns, local restrictions and underlying economic issues this may pose.
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Long-term future
Despite those medium-term factors developers and lenders have to be mindful of, the long-term future for developments in the UK remains as strong as ever.
There is still a housing shortage and a desire for high-quality housing after months in lockdown, and changing work environments with the growth of remote working may lead to more buyers looking for different types of housing which is more remote or offers more space, all of these demands still need to be met by lenders and developers working closely together.
Going forward, it is important that lenders remember the lessons they learned in lockdown of what their developers need to be successful; that will give them tools to better support them in certain and uncertain times.
If you are interested in development finance for an upcoming project, visit our development finance page for direct borrowers or development finance page for intermediaries.