In the wake of the UK’s recent ‘Brexit’ decision to leave the European Union, we felt it appropriate to issue a statement setting out our view of the climate for property development finance over the coming months, and how we intend to respond to the market conditions we are foreseeing.
There can be little doubt that conditions, at least in the short term, will be challenging. As you will be aware, share prices in the major UK property developers have retreated, property fund values have fallen (with a number closing to redemptions) and a number of lenders withdrawing from the market altogether.
Against that background, we felt it important to reassure both developers and intermediaries that we are very much ‘open for business’ and continuing to lend in relation to development and bridging projects that meet our criteria.
Our target market remains mid-market, mid-specification residential development, a sector we’re confident will experience continuing strong demand albeit at reduced value expectations. We regard it as prudent to anticipate a decline in property values of circa 10% in central London and circa 5% in the regions. Naturally, we will be adjusting our credit standards slightly to reflect this outlook.
Within borrowers’ financing proposals, we intend to apply particular focus to exit strategies – particularly the availability of residential and buy-to-let mortgages in 12 to 18 months’ time – as our funded developments release their units to the market.
In summary, whilst we are understandably cautious, we’re confident that, by pricing for risk, we will continue to support both direct borrowers and intermediaries by taking advantage of opportunities as they become available.
We look forward to working with you.
Wellesley Finance Plc