Auction, refurbs and stamp duty holiday could push bridging to £5bn market – Shawbrook

The lender noted demand for auction finance and heavy refurbishment work had been driving the market forward alongside the well-publicised stamp duty holiday which ends on 31 March.

The market broke £4.5bn in 2019 but with the pandemic hitting business significantly this year it will fall back in 2020, but there is hope for a strong rebound next year.

Writing in its Bridging Market Snapshot, Shawbrook Bank sales director Emma Cox (pictured) said: “We saw an understandable drop off in activity in Q2 [of 2020], but as the property market has rebounded, so too has bridging.

“And with the expiry of the stamp duty holiday looming, Q1 2021 could be extraordinarily busy and pave the way to a market that could exceed £5bn.”

Auction activity up

The lender noted that a good indication of a bounce back in the bridging market could be seen from the latest data on auction activity, with auctions an important driver of demand for bridging finance.

“The latest data from the national auction analysis shows that activity has recovered at an impressive rate since the depths of lockdown earlier in the year,” it said.

“In September, total amounts raised stood 38.8 per cent above the same month in 2019, compared to an annual drop of 56 per cent in April 2020.”

Two large commercial sales were significant to a increasing the commercial amounts raised by 153 per cent in the year to September compared to the same period in 2019.

However, amounts raised from residential lots were also up 22.3 per cent in the year to September.

Heavy refurbs adding yield

An uptick in heavy refurbishment projects is also an indicator of market bounce back, Shawbrook added.

Its data found increased demand from borrowers looking to fund heavy refurbishment projects for higher yielding assets such as larger houses in multiple occupation (HMOs), multi-unit blocks, and converting space above commercial property.

Likewise, feedback to the lender’s broker survey saw 53 per cent of advisers seeing an increase in demand in this area.

Commenting in the report, Commercial Financial Services founder Simon Purdom said: “In terms of volumes, we have seen a substantial increase in the last quarter.”

He noted this included financing out from development loans and bridge-to-let deals to complete.

Shawbrook’s Cox added: “It’s been a difficult time for the property market, and of course the current landscape has left many facing challenges – especially within the bridging space, where some lenders had to halt business in this area for a period of time during the height of the pandemic.

“It is positive to see many of these lenders recently return to market, and as our report shows, to see that the housing market is moving again.

“The use of bridging to carry out refurbishments and conversions, as well as to aid chain breaks due to elongated sales processes, is an essential funding option that can support lucrative investment opportunities.”