Development – A rising interest in regional areas, no longer London centric
Industry data suggests that the property market – especially in prime central London has been stagnant and in certain sub-markets, started to show signs of a slowdown.
Thus, developers have shifted their interest to regional areas such as Birmingham, Manchester and Glasgow where land values have grown by a minimum of 15% over the previous 12 months (to April)
What makes the specialist lending market special?
The financial crisis was the catalyst for the rise of specialist lenders; with several mainstream lenders pulling back from short term higher risk lending.
Since 2008 we have seen hundreds of new lenders enter the market.
This increase in competition has forced innovation across the industry in speed, flexibility and specialist underwriting to price risk.
Regulated overtaking unregulated bridging for the first time
The unregulated nature of majority of the bridging (specialist) lending market has meant that it is difficult to quantify the size of the market.
It is believed the market is worth over £4bn, with regulated bridging activities representing 50.7% of the market share.
There are two primary reasons for regulated bridges out performing their counterpart:
1. The nature of these transactions – e.g. secured against primary residences
2. The overall awareness/availability of regulated bridging firms.
Death of Vanilla Bridging
The bridging sector is largely unregulated and historically has had low barriers to entry, especially when it comes to vanilla bridging loans.
To sustain a market share in an increasingly crowded market, downward pressure on pricing is inevitable.
In response to this increase in competition, lenders are looking to gain competitive advantages in the non-vanilla bridging sector where transaction risks are assessed at a more detailed level and priced accordingly.
These lenders need to keep adapting and improving across the board to ensure their place in an ever-changing market.
Author: PakSan Wu and Huilin Ma