Brexit one year on: The impact on development finance

by: Christine Toner
  • 16/06/2017
  • 0
Almost a year on from the referendum that heralded the beginning of the end of the UK’s partnership with Europe, the development finance sector remains strong as issues closer to home continue to overshadow Brexit, experts have claimed.

As we approach the anniversary of the ballot which saw 52% of the population vote to leave the EU, Specialist Lending Solutions asked a number of leading players what impact the result has had on development finance.

Chris Treadwell, head of Enness Development, said the issue of supply and demand was a bigger concern for the market than Brexit and as such the referendum result has had little impact.

“Whatever happens with Brexit, it does not alter the fact the UK has a massive housing shortage and we need more developers to be building houses,” he added. “To meet this need, developers are still borrowing and banks are still lending as before.

 

Developers continue to borrow

“Many contradictory predictions have been made about the effect Brexit and other political events will have on the market. Personally, I have not seen a negative impact on development finance as a result of Brexit, and my clients have not cut back on their borrowing.”

Nigel Bowers, national BDM at UK Property Finance agreed.

“Although the vote to leave the EU was somewhat unexpected, the development sector has continued to grow and currently shows little sign of an adverse reaction,” he said. “New lenders continue to enter the market and innovative products provide new ways for experienced developers to thrive and potential developers to enter the market.

“Obviously, the impact of the move towards the formal exit has been clouded by the results of last Thursday’s election but the signs are that the development sector is robust enough to ride out the uncertainty and continue to facilitate the building of new properties throughout the UK.”

 

Extended period of uncertainty

However, while the market has proven to be resillient so far it is not completely out of the woods yet.

Ashley Ilsen, head of lending, Regentsmead sais the problem with leaving the EU is that we have entered an “extended period of uncertainty”.

“Markets in general don’t respond well to uncertainty and the economy as a whole will undoubtedly be tested during this period,” he says. “Demand for development finance is still as strong as it was before the referendum vote and we at Regentsmead have actually seen a steady increase in enquiry levels. I suspect the way Brexit negotiations will have an immediate impact on schemes developers are taking on.”

Lucy Hodge, managing director, Vantage Finance said while on the face of it the Brexit vote seems to have had little impact on developers and development finance, the real test is yet to be seen.

“The vote is not the actual departure from the EU and that has only just begun amid a cloud of political uncertainty,” she said. “We did see a very short period of lender nerves hitting the market immediately after the vote, but it returned to business as usual soon after and in fact the development finance space is very liquid at present.

“It is quite hard to isolate the impact if any of Brexit in this market because of the raft of tax, regulatory and political changes we have seen in the space of a year which obviously affects the sales transactional market and therefore can have a knock on effect right from the beginning depending on the project the developer has taken on.

“Lenders will be more cautious where the owner occupier market for the resales is not as strong given the flattening of buy-to-let investor purchase transactions, especially where there are a large number of units being built to be sold at the end of the project.”

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