Lending markets to hold up despite uncertainty

Lending markets to hold up despite uncertainty

It was impossible not to be caught up in the General Election campaign – at the time of writing the polls had only just opened, and while the pundits still appear to think a Conservative Party majority is the most likely outcome, there will be some nervy Tory staff members who might well think that this campaign has been an unmitigated disaster.

Over the course of the last week, the campaign appeared to have one focus, and that was (to misquote Tony Blair) ‘Brexit, Brexit, Brexit’. Indeed, after straying into ‘national issues’ like social care, and coming off a distinct second-best, they appeared to say nothing but ‘Brexit’, ‘no deal is better than a bad deal’, and ‘trust me to negotiate the best deal for Britain’ in recent days.

11 days after the election Brexit negotiations begin. “Who do you want to be at that table negotiating for Britain?”, came the plaintive cry from Gavin Barwell MP – our former housing minister – at a recent London debate. He would perhaps not have anticipated a booming response from the audience of “CORBYN!”, like he received, but that’s politics for you.

Clearly, the European element is crucial in all of this; indeed in our very own housing market, while we have a particularly insular sector not really influenced by what goes on in the housing markets of the continent, it will be difficult to evade any potential negative fall-out as a result of Brexit.

After all, we will have to seriously consider what Brexit means for international banks that operate in the UK, specifically how might they react to a UK being outside the EU, and indeed how this might impact on their appetite to lend here. Undoubtedly, since the EU referendum last year, the stress on the pound has made the UK market even more attractive to foreign investors but for how long might this continue, and indeed what sort of political/regulatory provisions might be put in place to guard against more assets being bought by overseas investors, and left empty, as can often happen now.

The positive in all this has been the durability and the resilience of the UK housing market since last year’s referendum. The doomsday scenarios spelt out by many pre-referendum have not (yet) come to pass – we have not seen double-digit drops in house prices, we have not seen lending appetite dry up – indeed we’ve seen an ultra-competitive pricing situation across nearly all sectors, and we’ve seen activity levels maintain their momentum.

Which of course is not to say that some of this won’t come to pass at some point in the future. And this is perhaps why now is a particularly positive time for advisers (and their clients) to review their options and needs, and to take advantage of a relatively benign environment for finance which might not last into the medium to long-term.

Certainly, from a development finance stance, we’ve seen a noticeable uptick in enquiries for these types of loans, fuelled no doubt by the continued lack of supply available in the market, the fact prices are holding up, and the belief that now is a good time to develop/renovate properties within a portfolio in order to get them to market. In that sense then we can concur that now is a good time to be ‘in the market’ for development finance because, with the support of a packager/distributor like ourselves, we’re able to access and source the type of deals that will be particularly attractive for your development clients.

All in all, even with the political uncertainty and what will undoubtedly be a period of instability during the Brexit negotiations, the lending markets should continue to hold up well. However, nothing is set in stone and therefore if you have clients who fit this particular borrower category, then now could be the time to make it happen for them.

Donna Wells is director at First 4 Bridging