The UK property market faces unique challenges. A shortage of affordable housing, combined with macroeconomic pressures such as supply-chain issues and the impact of the UK’s withdrawal from the EU, has led to house prices reaching a record average of £278,123, according to Halifax’s House Price Index. The only way out of this crisis is by developing new housing.
However, traditional bank lenders can be ill-equipped for this task. Once a dominant force, they have a reduced risk appetite and tighter eligibility criteria following the financial crisis of 2008. Bank lenders also use standardised assessment processes that do not take into account the individual needs of each development. This has a negative impact on comparatively smaller developments, which are less likely to receive support from traditional lenders.
This approach also creates rigid loan conditions that do not allow for the flexibility required to adapt to current disruptive forces within the market.
It is evident that non-bank lenders need to increase their efforts to provide the alternative forms of fast and flexible lending required to combat the UK’s housing crisis.
Take for example the current challenges facing the UK’s housing and property sector, which have been Impacted by delays in construction due to Covid and supply chain issues. As a result, there is a desperate need to accelerate the construction of new housing to solve shortages.
Triple Point’s private credit team pride themselves on their fast decision-making process. After meeting borrowers and evaluating development sites, the property lending team make a decision within 24 hours. This ensures a swift construction process, reducing the time normally spent navigating the unwieldy application process, which frequently produces poor and inflexible terms and conditions.
To counter the constant risk of unavoidable delays to the construction process caused by outside macroeconomic forces, non-bank lenders can provide the support property developers need and which traditional banks cannot. During difficult times, this can mean being flexible about extending or supporting the terms of their loan repayment.
Such support also extends to smaller transactions, which usually do not receive bank financing. This is particularly true of the UK buy-to-rent sector, which often consists of smaller-scale projects. According to a report by Capital Economics, the UK needs 230,000 new homes to match current demands within the rental sector. This demand has contributed to soaring house prices, with the value of the average buy-to-rent property across the UK rising by 5.6% to around £258,900, according to Shawbrook Bank.
However, yields on buy-to-rent properties in London are among the lowest in the country, at 3.9%, compared with the UK’s average of 4.3%. While traditional bank lenders may overlook the buy-to-rent market due to these low yields, private lenders can afford to look at smaller transactions and still make a healthy return.
Triple Point’s property lending team has chosen to take a flexible approach to accommodating the needs of each development, no matter what its size. Understanding that supply-chain issues and staff shortages can delay projects for sustained periods, our operations are designed to react quickly to these changes in the market and offer personalised solutions and flexible support in the form of both increased funding and term extensions.
As we look for ways to help reduce the shortage of housing in the UK, it is clear that the housing crisis can only be effectively solved by providing fast and flexible loans to property developers. Non-bank lenders are in a unique position to provide this support and have the ability to fill the gap left behind by traditional retail banks. It is clear that future of the UK’s housing and property sector now depends more than ever on non-bank lenders to help provide people with a permanent place they can call home.
Andrew Stoneman is head of property lending at Triple Point