Bridging sector breaks £5bn
Gross annual bridging lending broke £5bn by the end of 2017, the West One Bridging Index found.
ASTL members lent over £1bn in the quarter during which the Bank of England implemented the 0.25% rise in their base rate.
Payam Azadi, director at Niche Advice, said: “I’m surprised. That figure is quite large and I didn’t expect it but it makes sense why so many lenders are looking to get involved in bridging.”
Alan Dring, consultant at Hope Capital, said: “I was surprised. You’ve got to be encouraged because that’s the way contributors to the data are seeing the market.
“The data in the bridging sector is often questionable. Its showing the trend is upwards and that has got to reinforce the fact the market is continuing to be vibrant.
“Hope had its best first quarter this year so it’s reflected upon ASTL members I think. It’s just a good indidcator that people’s confidence remains in the sector. There’s more solicitors trying to get into bridging and people trying to acquire the specialisms to generate a lot in this market.”
The higher volume of smaller-sized transactions that characterised the latter part of 2017 has continued through to the end of the year, as property investors look regionally for their returns.
Higher volumes of smaller transaction sizes have persisted throughout the second half of 2017. Average loan sizes remained between £600,000 and £800,000 in the quarter and confirming a longer-run average trending to below £800,000.
Transaction volumes continue to be strong, however, resulting in total lending surging in Q4 2017.
Marie Grundy, sales director of West One, said: “In 2017, bridging has turned out to be a ray of sunshine in the property finance world, with a series of record performances throughout the year.
“The industry shrugged off the headwinds buffeting other parts of the industry, to deliver a final lending total of £5bn for the year. At West One, our short-term lending grew with similar strength to a book of around £450m and record volumes of transactions in the year.
“What’s perhaps most encouraging is to see a breakthrough in the diversity of that growth, with more and more opportunities being found regionally.
“Where I am, in the North West of England, places like Greater Manchester and Merseyside are increasingly vibrant cities that are benefitting from urban regeneration and moves away from London, like the BBC made a few years ago.
“That means that these, along with Birmingham and the East Midlands that are extended commutes from London, are attractive places to live. Opportunistic investors looking for better returns are finding them here, and bridging is well placed to help them capitalise on those.
“Looking ahead, we remain confident in further growth of the bridging market not only through further regional expansion, but also as SME developers seek small project funding for housebuilding, to meet the government’s new home targets.
“With many finding it hard to get funding for projects under £1m, or to finance property acquisition whilst planning permission is being obtained, bridging is well-placed to support them.”
Greater buoyancy in property markets outside London and the South East are offering property investors better rental yields and even some opportunities for capital appreciation at a time when the capital city is offering neither.
Danny Waters, chief executive of Enra Group, said: “The bridging sector has performed excellently in 2017, despite the backdrop of concern around the progress of Brexit negotiations, sluggish economic indicators and interest rate rises.
“Whilst a few lenders have notably taken 2017 as the time to exit bridging, we are generally seeing more competition in the sector, which both drives innovation and keeps pricing attractive for customers.
“That continuing adaptation to conditions and to borrowers’ needs has been a key strength for the sector in the decade since the financial crisis.
“Providing the flexible funding options that property professionals need, especially small developers, is the key to bridging continuing its growth trajectory, however the Brexit negotiations and the wider economy progress.”