Over the next three years 92% of mid-sized residential property developers expect the level of funding they source from specialist property finance companies will increase.
According to new research from Downing LLP, property developers across the UK expect traditional banks will become less willing to lend due to concerns about a property price correction, as well as concerns regarding the state of the economy.
Developers also cite the more flexible terms and conditions offered by specialist lenders as a reason for this change, with over 12% of those surveyed claiming that they anticipate a dramatic rise in funding from these specialist sources.
Parik Chandra, partner and head of specialist lending at Downing LLP, said: “Our research suggests that specialist lenders will take a growing share of the residential property funding market.
“To date, we have committed over £300 million to medium-sized residential property developers, with around £140 million achieved in the last financial year.”
When surveyed, 40% of the developers said that 25% of their funding is sourced from specialist lenders.
Moreover, 36% said it is between 25% and 50%, and 24% said it is higher than this.
However, 72% of property developers agree that it is becoming harder to secure funding for residential property building projects because of concerns regarding overall costs rising dramatically.
Chandra added: “Regardless of where they source their funding from, in the current market developers need to do more work in preparing comprehensive plans and budgets that they can share with prospective lenders.”
