Alternative property lenders don’t expect house price crash
Alternative property lenders do not expect to see a substantial fall in house prices, and believe that property developers have no reason to panic.
As economic challenges threaten to lead the UK into a recession, many analysts have predicted a sharp drop in property values. Earlier this week, Zoopla predicted that house prices would fall by five per cent, while NatWest has estimated a seven per cent drop, and Lloyds has predicted a fall of eight per cent.
However, Steve Larkin, head of development finance at alternative property lender LendInvest, pointed out that underlying demand for property has not changed, adding that property developers should not panic.
“What we’ve seen so far in these economic conditions is how house prices haven’t materially fallen,” Larkin said.
“Years of chronic under development means that demand for new properties remains as strong as ever, and the ambition from regions is to get more homes built.
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“In this context, developers shouldn’t feel like they have to delay plans, because as we’ve seen through Brexit and Covid in recent years the demand for homes is there on the other side of a challenging period.”
Meanwhile, Roxana Mohammadian-Molina, chief strategy officer at specialist development finance lender Blend, said that she doesn’t think there will be a huge crash in property values.
“I think the market will decline selectively and not across the board,” she added. “Mature areas with good transport links will remain resilient, while saturated areas with stock oversupply will suffer.”
Mohammadian-Molina pointed out that the pound’s recent weakness is likely to help support the prime London market.
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“Average prime London achieved prices per square foot in September were just below their previous 2014/15 peak (four per cent),” she explained. “However, prices were 35 per cent lower when converted into US dollars and 22 per cent below their peak when converted to euros. That represents a substantial discount.”
Both Mohammadian-Molina and Larkin noted that the property sector has faced a number of challenges due to Brexit-linked supply chain issues, Covid delays, and recent economic uncertainty. However, they agreed that alternative property lenders are best placed to help property developers navigate the macro economic environment.
“While the economic challenges of the past few months may have exacerbated the problem around costs, this is nothing developers haven’t been used to dealing with,” said Larkin.
“Managing this with flexible, understanding lenders willing to amend facilities or extend loan terms, and by using lenders who can deliver cash quickly with 24 hour drawdowns to take advantage of the current price will make these challenges easier to overcome.”
Mohammadian-Molina said that she sees lenders becoming more selective, meaning that alternative lenders can afford to be very picky with the developers that they back.
“I think experienced developers will have no issue accessing funding, less experienced developers will,” she added.
“Life goes on and the industry continues, opportunities arise and developers need to be able to have conversations with lenders who can understand, discuss and sometimes positively challenge what is trying to be achieved to find viable solutions.”
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