We need to build more – non-bank lenders can help

It is universally acknowledged that getting on the property ladder is far from straightforward these days. Andrew Stoneman, Head of Property Finance at Triple Point Private Credit, suggests that non-bank lenders can help weather the storm.

Related topics:  Construction,  Property,  Housing
Andrew Stoneman | Triple Point Private Credit
3rd February 2023
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Decades of insufficient housing delivery, rising mortgage rates, elevated construction costs, double-digit inflation and labour shortages have all come together to hamper developers from providing the country with the homes it so badly needs.

Despite a moderate fall in house prices over recent months, affordability remains a considerable issue for first-time buyers and only a new supply to satisfy the overwhelming demand can solve the nationwide housing crisis. Supporting developers to achieve the task at hand is vital, especially amid an uncertain economic landscape. This is where non-bank lenders such as Triple Point can help, providing fixed-rate lending to kickstart the building drive which will make the housing market fit for future generations.

Small and medium-sized developers are crucial

Shortages in housing supply are by no means a recent problem. Governments of political hues have traditionally fallen short of their housing targets. Studies show that the UK needs to construct around 300,000 new homes a year, a target which has been missed by a significant margin in recent years.

Any significant progress has been hampered by disagreements over planning reform, and it seems unlikely that the Levelling Up and Reform Bill, which is presently going through its second reading in the House of Lords, will deliver comprehensive changes to the planning system.

Community involvement in planning decisions is a key priority with or without reform, which puts small and mid-sized developers in a prime position to provide badly needed housing across the nation. Smaller developments mean good quality homes with vital infrastructure links which enable communities to evolve naturally.

Yet these small and mid-sized developers are currently suffering from several challenges, including supply chain problems, a labour shortage, and rising material and energy prices. Access to finance at attractive conditions is essential if developers are to deliver on the scale needed to bring supply in line with demand.

Sector challenges

The war in Ukraine has only served to worsen the increased material costs that developers have been experiencing since the beginning of 2021. Even if the supply bottlenecks are beginning to loosen somewhat, double-digit inflation and high energy costs are only going to add to cost pressures in 2023.

Materials including cement, bricks, timber, and aggregates are all anticipated to remain expensive in the upcoming months, with around half of the construction professionals citing material costs as their main concern for the year ahead. 

The shortage of skilled workers affecting the building industry is another urgent problem. According to a poll by the Civil Engineering Contractors Association, 75% of contractors have reported having trouble finding skilled workers. This has a severe impact on developers' capacity to move forward on urgently required projects that would provide additional housing supply.

Financial uncertainty is another key issue. The era of cheap money may be over, but ahead of 2022, many developers took out variable-rate loans during a low-interest-rate environment. The last year saw rates go up to combat inflation, which has left many firms with considerable unexpected costs. These additional budget pressures are making forward planning much harder and hampering construction.

Non-bank lenders can help weather the storm

After an uncertain 24 months, developers are in need of financial certainty. While some lenders have abandoned the small and medium-sized development market, non-bank lenders such as Triple Point have been able to fill the void with targeted, specialised, and flexible finance that is readily available at attractive terms.

Triple Point's Property Lending team is one of only a few lenders offering fixed-rate loans, giving developers financial security for the future. Private lenders, as opposed to traditional banks, are also capable of responding to applications quickly, which is crucial for developers trying to get financing on short notice.

Trust is another important factor. Non-bank lenders excel at establishing long-lasting and close relationships with developers, which equips them to react intelligently and quickly to changing conditions. Because of this strong cooperation, many of Triple Point's clients are loyal and repeat customers who appreciate the team's personalised and hands-on approach.

The coming year will undoubtedly be difficult for developers. Although it appears that inflation has peaked, it will continue to be at high levels throughout 2023, and the era of low-interest rates appears to be at an end. Despite these obstacles, non-bank lenders like Triple Point can provide financial certainty and assist small and mid-sized developers to swiftly access the materials and workforce needed to create a housing market fit for the future.

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