6 July 2018

Buoyant market for development finance, while advice required on new-build lending 

There is good news for those requiring development finance as the lending market is particularly buoyant with more than 40 active lenders. Traditional high-street banks are being squeezed out by challenger banks and alternative lenders offering higher loan-to-values, allowing developers’ equity to go further. SPF Private Clients has access to a number of lenders prepared to lend up to 75 per cent of gross development value, which in some circumstances can equate to 100 per cent of costs.

London and the South East remain very popular for developers but a number of lenders are looking to support wider regional activity. The only negative is a general aversion to high-value units (£1,500-plus per square foot) without a high level of pre-sales.

On the new-build side, first-time buyers and investors can have trouble finding a bank willing to lend where there is a commercial element to the building. When valuing new-build properties, most banks cap their lending at 80 per cent loan-to-value, although some will go as high as 90 or even 95 per cent, as the Help to Buy scheme enables them to reduce their risk.

Valuers must determine the future saleability of the property to prevent negative equity situations, and lenders base the decision to lend on their comments. Difficulties occur when a valuer has taken a negative view on a development, which can cause issues for agents, developers and prospective buyers, so it is important to establish which banks will be willing to lend and reduce the potential for issues down the line. We can help steer you through the process: get in touch for more information.

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