The specialist lending marketplace continues to experience significant growth in terms of demand and activity, reflecting its fast-growing perception across the broader mortgage market and increased recognition amongst landlords, investors, developers and intermediaries.
Portfolio landlords
Focusing on some key parts of this marketplace, nearly four in 10 (37%) portfolio landlords have said that they intend to increase the size of their portfolios this year, with the majority funding purchases by releasing equity from other properties in their portfolio or using existing capital – 55% and 58% respectively.
This is according to findings from Paragon’s new Portfolio Landlord Report 2024, which also outlined that 69% of those adding property are doing so as part of a portfolio expansion strategy, 60% are driven by long-term demand for rental property, and 50% are doing so as part of their retirement plan.
The survey also showed that 61% of landlords will buy with a mortgage, 39% will buy outright, and 52% of landlords prefer to purchase terraced homes, 46% semi-detached homes and 26% individual flats.
There has been much talk about the demise of the BTL sector in recent times but robust levels of demand from the more professional end of the market demonstrates that plenty of landlords are actively looking to take advantage of a host of property-related opportunities as they arise.
Despite ongoing speculation around the decline of the buy-to-let sector, this data helps demonstrate the number of professional landlords and investors who are actively seeking opportunities. However, finding the right financial solution for a variety of complex property-related transactions has become increasingly problematic without specialist support and funding.
Development Finance
New research from Shawbrook revealed that 77% of developers consider securing funding to be the most complicated aspect of their business, with 75% citing limited funding options as a major obstacle. Additionally, over a quarter (26%) have faced multiple rejections from mainstream lenders, highlighting the significant challenges in obtaining necessary financing. Although, 77% of respondents stated that specialist lenders offer better support.
While barriers to entry remain, our experience shows that funding is accessible if developers know where to look and whom to approach. Specialist lenders can effectively structure funding to unlock liquidity, but some are only accessible via property finance experts who bring additional expertise to the table and can properly package deals to successfully navigate this sometimes-thorny lending landscape.
Commercial
Here at Envelop, we’ve seen rising volumes of commercial term finance over the course of the year. So, it was little surprise to see Allsop report one of its highest commercial auction totals in July. This raised £54.5 million from 65 lots with an 80% success rate and an average lot size of £839,000. The sale brought the total raised this year to £291.3 million, with 350 lots sold and 85 lots achieving prices over £1 million, reflecting an overall success rate of 88%.
The intermediary market has always played a crucial role in funding the needs of businesses at various growth stages. And, in the coming months, there is likely to be an increased emphasis on this role, as a sense of calm has emerged following the largely expected General Election result, and reduced anxiety about the future path of interest rates.
Bridging finance
The bridging finance sector also continues to experience solid growth, increased optimism and strong forward momentum. As highlighted in the inaugural Bridging Market Survey by Interpath and the Bridging & Development Lenders Association (BDLA) which reported that 62% of industry figures are expecting annual origination volumes to grow. Only 8% anticipate a decline, while 30% predict stability.
The survey also indicates that independent brokers are seen as the most crucial primary channel for originations by 53% of respondents, followed by master brokers at 32%.
For intermediaries who lack expertise in specific areas of the mortgage market, collaborating with a master broker, specialist distributor, or packaging partner – whatever you prefer to call them – can help overcome the challenges of many multifaceted sectors and highly complex property-related transactions.
This is a partnership that not only delivers improved outcomes for clients on a regular basis but also enhances long-term business prospects. A valuable combination is what remains a transitional property market.
Donna Francis, Managing Director at Envelop
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