"This delay is frustrating if you are selling one property, so imagine being a developer trying to sell several, or even dozens of properties ahead of the expiration of the development finance facility."
As always, there are big regional variations when it comes to prices and, unusually, at the moment it is London that is bottom of the pile. Nationwide’s House Price Index shows that London was the weakest performer in the first three months of this year, with annual growth falling to 4.8%.
Selling a property may be easier in the current environment but completing on the sale is getter harder. A recent report by multi-agent property service Movewise, found that average property is taking nearly a month longer to sell once under offer, due to a conveyancing bottleneck that has developed since the property market shutdown in March and April.
The website, GetAgent, went a step further, saying that it is currently taking 43 days longer to sell a home due to the delays caused by the stamp duty holiday.
This delay is frustrating if you are selling one property, so imagine being a developer trying to sell several, or even dozens of properties ahead of the expiration of the development finance facility.
This is one of the reasons why there is such strong demand for development exit loans at the moment. The longer lead times involved in both building and then selling a project mean there is an increasing appetite amongst developers to refinance their original loan, to buy themselves some more time and often to release capital to start their next development.
Of course, not all developers choose to sell all of the properties they develop and many will decide to maintain ownership of one, some or all of the properties for ongoing rental income and the potential for greater capital gains in the future. For these developers, bridge-to-let can be used as a flexible way of financing their plans.
The bridging element of bridge-to-let can be used as a development exit loan to refinance the scheme that is completed or nearing completion, often at a lower rate than the development finance facility. Then, when the properties are ready for tenants, bridge-to-let can switch over to longer-term funding which will usually be at a lower rate again.
This approach provides developers with certainty, as they have a pre-agreed exit for the bridging loan, but also flexibility as they can reduce the balance of their loan if they decide to sell some of the completed properties rather than let them to tenants.
The vibrant property market is clearly good news for developers, but it can also present challenges. A product like bridge-to-let can provide a valuable combination of flexibility and certainty to help them to maximise their gains, and free up capital to start on their next project.
