The old saying goes “It’s grim up North but the streets of London are paved with gold”. For generations we’ve all heard these views, although we know that in reality the situation is very different. So why are many still fixated on assessing an opportunity by postcode?
As a broker, how many times have you had a good client with a decent opportunity and been told “Sorry, we only lend in London or inside the M25” or “No, sorry we only lend in the South East”? This Southern-centric approach to lending is hampering developers in many parts of the North and creating real frustration for brokers. We hear it all the time, making you wonder whether lenders really think there is a future for them in the North? When it comes down to lending policies, we consistently come across the following:
- Many lenders (excluding Banks) are not lending their own money. Funds are raised from a variety of wholesale sources, many of which don’t have a strong understanding of property, leading them to take guidance from newspaper headlines which indicate rampant house price inflation in London, the South East and little else outside it. As a result, unsurprisingly, we see them concentrate and narrow their focus to these locations only.
- A number of lenders that only have a financial services background. They typically have little to no hands on experience of development or property investment, leaving them to rely on a valuer’s report, suggesting they may have a limited understanding of how strong a property market is (or isn’t) and what its key drivers are.
- “Once bitten….” It’s hard to forget the dramatic price drops of 2007/2008 which left vast blocks of flats sitting unsold across the country. Oversupply is a problem in any market if allowed to go unchecked, although it would appear to perception that the North was worst hit. However, you only have to walk between Battersea and Nine Elms if you are London based, to be aware of the oversupply and probable lack of off-plan sales that now won’t complete.
- Laziness; pure and simple. In a recent conversation with a Senior Manager at a large London based lender, they discussed a scheme near Manchester and stated “We wouldn’t go up there, it’s a full day out of the office and I wouldn’t get back until 8pm; I will have 80 emails to deal with when I get back, forget it”.
At Go Develop we make it happen. Where there is an opportunity, we go there, whatever the postcode and whatever the time; it’s one of many things that sets us apart from others. As a team mostly made up of ex-property developers, property is in our DNA, which gives us a big advantage in understanding why the future really is bright beyond the Watford Gap.
We see a great future for smart developers who really understand their market and utilise our model of 100% Joint Venture funding (all from our own substantial reserves). This allows them to optimise their earning potential through schemes that otherwise may not be possible.
There are still pit-falls in all markets. However, the underlying fundamentals and demographics are strong. At Go Develop we really will look at lending anywhere in the UK or Wales, fully embracing 100% funding, and that is a game changer.
Come and find us at this year’s Commercial Finance Expo (Stand B09) to find out more about Go Develop and our 100% Joint Venture funding opportunities that are already changing the face of property lending as we know it.