Property loans – Gross annual bridging lending in the UK increased to £4.2 billion in April as the market rebounded from the post-Brexit falls in the second half of 2016, according to the latest research.
The significant drop in lending in the third quarter of 2016 meant total annualised lending dropped towards the end of the year. However, with a significant rebound in the fourth quarter, as predicted, the market returned to growth at the start of 2017, the West One bridging index shows.
The index report points out that the recovery at the end of 2016 was sustained into the first quarter of 2017 as smaller investors make a return to the buy to let market and it is expected that steady growth will continue throughout 2017, although the market will still need to navigate some challenges ahead.
One of these challenges is the wider property market, which has shown signs of slowing in the first quarter of the year. In addition, it is still unclear what effect Brexit will have. The report explains that while the market recovered quickly from the shock referendum vote in June 2016, the long term effect of negotiations and the final deal for the UK represents a great unknown, which could cause some investors to act more cautiously.
‘We’ve seen a rise in bridging loan volumes as investors turn to alternative finance. The increase among smaller investors fits with the overall picture of residential market growth despite a jitter at the higher end of the market,’ said Stephen Wasserman, managing director of West One Loans.
‘The drop which followed the shock referendum result last summer was quickly recovered and this gives us confidence as an increasing number of commentators moot a slowdown in the housing market. Indeed, we continue to predict that the bridging market will go from strength to strength. Market moves present an opportunity for investors and those looking to capitalise on this will be seeking out the financing needed to enable them to do so,’ he explained.
‘Whatever happens next, the industry needs to be ready with diverse and flexible financing options for property purchasers. The bridging sector has seen a five fold growth in lending since 2011 and is well placed to take advantage of economic fluctuations, being able to adapt to changing needs as and when they emerge,’ he added.
The research also shows that the size of the typical bridging loan has continued to grow significantly over recent years, as property professionals increasingly incorporated bridging into their project financing arrangements. In recent months an upward trend has continued.
However a noticeable effect in the first three month of 2017 has been for a larger volume of smaller loans, particularly evident in January and March figures both around £800,000. Two data points are not enough to extrapolate a trend, the report suggests, but adds that this may be a result of fewer large transactions coming to market, as investors wait and see how higher end properties such as central London residential develop.
Overall, it concludes that strong competition in the sector has created excellent value for consumers as rates have remained below 2% for more than 18 months. This historically low rate environment means that the firm expects borrowers to continue to look at alternative financing options in the future. It adds that this could prove a crucial advantage to well funded players in the market, who are able to satisfy customers with special circumstances who often need loans in quick turnaround timeframe.
Source: Property Wire