Regardless of snap elections, Brexit or whether it’s going to be a BBQ Summer, there’s a bigger underlying issue at the heart of our economy – the British housing market remains chronically undersupplied and has done for the last two decades.
Various figures are banded around but many agree that around 300k new homes need to be built each year to cope with demand, even if net migration were to fall substantially.
There has been some improvement – in 2015-2016 almost 190k net additional homes including 164k new builds were created but even this is 15% below the 2007-08 peak and still only about half the amount we need is built each year and its likely to get worse.
For the past decade, SME housebuilders and developers in particular have had a tough deal. Between 2007-2009, a third of small companies ceased building homes.
Over half the countries entire new build is built by just 7 PLC Housebuilders, who have the scale, finance and synergies to dominate. It’s a tragedy that along with the usual challenges of red tape and bureaucracy, many lenders simply shut their doors to small and medium housebuilding companies, scared of their own shadows and that of the regulator. LTV’s were wound back, policy u turns keep evolving and Postcode slotting is rife. Decision making is slow, inefficient and dysfunctional, so time then drags on… a Housebuilders number one enemy.
Now we have the rising cost of imported materials thanks to the drop in Sterling, and the fear that one in four construction workers could be lost from ‘hard’ Brexit negotiations. With short term sentiment fluctuating as every piece of Brexit news is aired, it’s plain to see that housebuilders are continuing to fight some challenging circumstances and it’s our job at Go Develop to help them as a strategic partner.
The Government continues to meddle with our sector by tax, regulatory obsession and recent changes to stamp duty including a second home buyers tax. It’s in this sort of environment where housebuilders and developers, in need of finance, must seek out a fast, flexible and compliant alternative to the mainstream lenders that are poor quality and inefficient.
Most banks simply don’t understand the essential partnership of developer and funder. From a ‘computer says’ mentality or over reliance on a less than perfect credit record; these hurdles can leave a great new-build project dead in the water with the expected reliable bank applying the selective amnesia, they are so well known for.
Since the credit crunch, mainstream lenders have been slow to return to small-scale development finance, if they have returned at all. Many focus on a developer’s history as the be all and end all – ignoring the merits of the individual build project and the fact that even the best developers can have setbacks over the years.
For specialist funders that know property and ignore macro-economic noise the playing field looks different. Free of the capital restrictions and overhead costs that banks have to contend with, they can offer tailored financing that fits.
One such refreshing alternative is Go Develop’s unique joint venture property partnership. It has been described as a game changer, a proposition like no other and we would agree.
Our unique joint venture funding solution allows us to support our partners with 100 per cent LTV full funding for all land and build costs. Indeed, it is often 115% of cost at the outset when all the developer’s soft costs and SDLT are paid for, by us.
Delivering funds on time, every time, fast and fuss free and being simple to do business with, enables our developer partners to do what they do best, crack on and develop.