"With competitive rates and progressively higher loan-to-value ratios, I’m not surprised that the bridging finance market has seen a notable uptick in applications this year"
The commercial auction market is more than holding its own at the present time. According to Acuitus, a specialist in real estate auctioneering and investment, the auction sector’s share has been rising in the current market, increasing from just over 13% of commercial property market to around 18% in 2022
Acuitus reported that for transactions under £10m, the auction market’s share has increased from just over 10% in Q1 2021 to nearly 28% in the final quarter of 2022. In addition, auction sales volumes totalled £773.6m in 2022, nearly 25% higher than the 10-year average. Meanwhile, the average lot size increased by more than 18% to £701k and success rate rose from 79.6% to 88.5%.
With house prices falling and the homebuying and selling process taking longer than before, increasing numbers of investors have been exploring alternative methods to ensure a secure transaction and proper pricing for a property. Auctions provide an ideal solution as they offer predetermined completion timeframes and the option to set a reserve price.
This equally applies to the auction market for commercial property. Many properties available at auctions are aged or in need of repair, making them excellent candidates for renovation. Additionally, repossessed properties can be acquired at below market value and need only minor cosmetic updates to get them up to scratch for rental purposes.
At Alternative Bridging, we’re continuing to see demand for finance from owner-occupied businesses. For those that want to use their premises to release capital, there are various options. Bridging finance frequently serves as the initial go-to option for investors who have identified a property they wish to acquire swiftly, which is of course the case with auctions. This financing solution not only facilitates prompt property purchases, but also supports any necessary refurbishments. With competitive rates and progressively higher loan-to-value ratios, I’m not surprised that the bridging finance market has seen a notable uptick in applications this year at a time when other parts of the specialist lending market have found conditions tougher.
For investors aiming to quickly acquire properties, certainty is crucial. They need assurance that funds can be secured promptly and will be available when needed. We’ve all heard about borrowers being left in the lurch at the eleventh hour because their lender has had second thoughts and pulled the funding. It’s bad news for the client, of course, but it also damages the reputation of the lender, and that’s not something that’s easily repaired.
Flexible funding
Now, although bridging finance doesn't entail a lengthy process like residential mortgages, there is still an application process to complete, even for returning clients. Any delays could result in investors missing out on valuable opportunities.
This is where our Alternative Overdraft product comes into play. It offers a flexible drawdown facility that supplies liquidity whenever a borrower requires it. The facility can be repeatedly drawn upon and repaid, making it the ideal overdraft for real estate, property auctions, site acquisitions, or funding work-in-progress.
The Alternative Overdraft is available for two years, followed by a review, and can be secured by a first charge over commercial or residential properties and a second charge over residential properties. Interest is charged on the outstanding balance and can be serviced or accrued. Loans range from £250,000 to £3 million, allowing under-utilised assets to play a significant role in an investor's financial arrangements.
Investors need an array of options these days if they want to be able to move swiftly and decisively, and we’ve seen great interest in our Alternative Overdraft from borrowers looking to secure property. There’s no need to miss out on a deal ever again because the process took too long.
Even in the face of difficult economic circumstances, companies will continue to plan ahead, and entrepreneurs consistently seek new opportunities. By capitalising on their commercial property assets, by using a flexible product such as the Alterative Overdraft, businesses have a straightforward path to finance their commercial property purchases.
