Build August PDF

Build Magazine 52 Beating the Brexit Blues with New Funding Models for Build-To-Rent he construction and property industries are clearly still assessing the challenges ahead following the vote to leave the EU. Change is the order of the day and housebuilders must move with the times to survive. Regional housebuilders in particular face an uncertain future and housing schemes without finance could now be at considerable risk. This is unfortunate since the dynamics of the housing market remain essentially the same – that is, poor supply combined with high demand. The spectre of a housing slump looms large with some pockets of London and the South East already at a standstill – but there is a glimmer of hope in the form of build-to-rent. The private rented sector has taken off in recent years with developers, corporate landlords and institutions moving into this area. City centre apartments are increasingly attractive to young professionals and there is a strong demand for good quality, high specification rental properties. Tenants want professionally managed, attractive and secure housing both in the Capital and regionally. Regional cities provide great prospects for fantastic returns and offer investment potential, fuelled by a housing shortage and strong local economies. We have discovered that there is significant demand for well-located and well-connected city developments right across the UK and PRS is the perfect housing solution for young professionals attracted to urban living and all that entails. These types of developments are also a hit with private investors seeking a secure return. I believe we can mitigate the impact of Brexit on the housing market and we can offer small regional housebuilders and construction firms’ assistance with an alternative to traditional bank finance. Housebuilders need access to a menu of funding models that benefit all parties – allowing housebuilders and developers to build with secure financial terms and low interest costs, while eliminating marketing and sales costs. These models include: • Forward funding – under which a development is purchased before construction has started and staged payments are given throughout the build process. • Off plan schemes – Delph can offer large deposits of up to 40% , enabling builders and developers to secure better funding terms with the their banks and save on sales and marketing costs. • Completed stock purchasing – to allow developers to move quickly on to their next project • Pre-purchase partnering – allowing builders and developers to pre-sell units prior to exchanging on a site which may not only help secure the deal but significantly improve cash flow and eliminate any sales risk. Each model provides the developer with a guaranteed exit, allowing them to move quickly onto their next development upon completion of their current one. This proposition to housebuilders and developers is one that secures better financial terms through reducing interest rate charges, increasing loan to value gearings and giving access to a wider choice of lenders. Following this approach, we have managed to grow sustainably to amass one of the largest privately-owned private rented sector portfolio in the UK, with some 1,700 units either in the portfolio or in the pipeline, and we have plans to reach 3,000 units in the near future. T Because we are so confident in PRS, we are making £500 million available over the next five years for development finance for new-build housing projects outside of London. We do this with the full knowledge that certain banks and other financial institutions are less than willing to provide finance for development outside London and the South East. We’re prepared to finance housing schemes outside of London, where the banks are not. For housebuilders and construction firms, the UK’s cyclical property market has typically resulted in a famine or feast existence. All signs seem to suggest that following Brexit, the wheel has taken the first turn in a downward direction. I think the high end residential market in London will be knocked back and developers may be forced to look to the regions. There are opportunities outside of London and the South East and we are confident our success will show them the way in time. w: t: +44(0) 20 7907 5555 e: [email protected] Finance Howard Crocker - Managing Director at Delph