The amount lent by banks to property developers fell in the months leading up to the Brexit vote and has struggled to recover since as banks slash lending to the sector, says peer-to-peer secured lending platform Saving Stream.
The amount lent by banks to property developers has fallen 7 per cent year-on-year, from GBP16 billion outstanding in December 2015 to GBP14.8 billion in December 2016, according to the Bank of England.
Lending has not recovered – the value outstanding last month was the same as it was in June 2016.
Saving Stream says this reduction is a reflection of the ongoing uncertainty surrounding the outcome of the Brexit vote and its effect on the property market in the UK.
Economists at some banks have predicted that consumer spending will slow later this year as will business confidence. As a result, the willingness of banks to lend to the property development market has waned.
Saving Stream says many property developers have become increasingly frustrated as they struggle to meet their funding requirements and good development schemes stall.
The reluctance of traditional banks to lend is creating more opportunities for alternative lenders, such as peer to peer platforms, to step in. Alternative finance is enabling property investors and developers to invest in new asset purchases and projects through providing much needed liquidity.
Liam Brooke, co-founder of Saving Stream, says: “Brexit uncertainty has hit property developers hard over the last year as traditional sources of funding tighten their belts.
“There is a wealth of good investment opportunities out there and although banks may be paring down lending in the sector, it’s business as usual for alternative finance providers.
“Despite Brexit, the advantages of investing in UK property remain in place. Interest rates are likely to stay low, whilst the UK’s housing shortage is unlikely to be resolved any time soon.
“P2P lending is making a real name for itself in the property market as it provides an efficient way for developers to obtain funding and easy access to bricks and mortar investments for individuals.
“For Saving Stream and its investors, the range of opportunities is improving all the time.”
Saving Stream’s model provides property finance and development loans secured against the value of the property at a maximum of 70 per cent loan-to-value, minimising investment risk. Investors have the potential to earn a gross annual return of up to 12 per cent through Saving Stream’s peer-to-peer platform.