HS2 may reveal lender inexperience in development finance – Regentsmead

by: Christine Toner
  • 03/08/2017
  • 0
HS2 may reveal lender inexperience in development finance – Regentsmead
HS2 will draw an increase in lenders in the development finance space despite a lack of expertise in the sector, industry experts have warned.

Ashley Ilsen, head of lending at development finance provider Regentsmead, said the controversial high speed rail scheme will see opportunities for both developers and lenders but warned of the “pitfalls” of inexperience.

He said: “Major infrastructure developments, depending on the state of the economy, do invariably help increase demand for housing in certain areas further away from London and we would subsequently expect values to rise in these areas.

“There is no doubt an attraction here for development finance lenders both old and new as we have already seen lenders being attracted by the return in these areas and lured by the uplift created in various largescale investments. Good examples of this are Crossrail and the major transport improvements made recently to Cambridgeshire, Suffolk and Norfolk where we have a seen a substantial increase in property values.”

Major pitfalls

However, Ilsen warned that lenders throwing money at development finance could be wading into problems.

“Development finance requires the respective firms to have a deep knowledge of how to fund development schemes, and a trenchant understanding of the pitfalls involved,” he continued.

“We have already seen many examples of lenders stepping into areas where they may not have the appropriate level of expertise and I would expect this to continue for the foreseeable future until we have a full-scale market correction.”

Meanwhile Steve Larkin, director of development finance at LendInvest says developers should be prepared for “resistance” from the public as a result of the controversy surrounding the scheme.

“The construction of the HS2 will undoubtedly encourage more development in areas on its route such as Crewe that will now have more commutable access to London or Manchester. However, due to the negative reception that the HS2 has received from various residential areas, developers should be prepared for the possibly of resistance when it comes to planning. 
“With regards to more developers coming to market, we can certainly expect that too, although most of these will still be looking at the South East market. This is one of the many reasons we have recently put a large focus on the North, with two new BDM hires and our property development academies now running in the region, we believe this area is a golden opportunity for development.” 

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