Bridging in the North

North sees 'marked reduction' in bridging case size



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A finance broker has claimed that while demand for bridging finance had not particularly softened in the North, the levels of debt requested had “definitely reduced”.

The comment follows mtf’s latest broker sentiment survey which revealed that bridging loan demand in the North West was down in Q3 compared with Q2.


Attributed to mtf’s Q3 2018 Broker Sentiment Survey

The report also found that London had climbed above the Midlands into second place with regard to demand.


Attributed to mtf’s Q2 2018 Broker Sentiment Survey

Has the industry noticed a fall in demand in the North?

Chris Whitney, head of specialist finance at Enness, felt the rate of bridging finance demand in the North had fallen.

“I think we are just seeing the rate of growth slowing after these areas have enjoyed strong growth over the last few years.”

Vic Jannels, chairman at AToM, didn’t think demand had particularly dropped in the North, but the levels of debt requested had definitely reduced.

“I am not sure that they have slowed for us and – talking to a couple of lenders – I posed the question.

“Their view was the same as mine.

“Minimal reduction in case numbers, but certainly a marked reduction in case size.”

D’mitri Zaprzala, head of sales at Octopus Property, felt demand for bridging finance in the North had not softened.

“Following a number of hires across the Midlands and North of England, enquiry levels in these regions have grown to record levels.

“In the month of October alone, more than 35% of our new applications have come from these areas.”

Jack Coombs, director at Aspen Bridging, agreed: “At Aspen, we have actually seen an increased demand from the North as we have 10% of our pipeline from that part of the country versus only 6.5% of our historic book.”

Chris Gardner at Amicus Finance questioned the report.

“A few outliers including some big loans, big developments and a new product or lender here and there can provide false insights on market performance when measured over a short timeline.

“Add to this external influences – such as planning application seasonality – and it can be hard to draw concrete conclusions on where the market really is.

“The year-on-year figures are much more likely to show us where the hot spots really are, and where opportunity may be knocking.”

What could cause a fall in demand in the regions?

“The reason why demand may have slowed is because commercial and buy-to-let lenders have become more open to looking at deals and, therefore, the purchaser or refinancing property owner is now able to look at a more commercially viable loan than opposed to a bridging deal,” said Zed Lorgat at JM Financial.

Lucy Barrett, managing director at Vantage Finance, said the North West was benefiting from the BTL market performing better in the region as landlords and investors looked for better yields and capital gain.

Bridge-to-let products are doing well, and activity breeds activity – so as the BTL market is doing well, it has a knock-on effect in stimulating developments, refurbishments and conversions, all of which bridging finance can help with.”

D’mitri suggested that demand may have softened due to completion times being quicker in these regions compared with London and the South East.

“As capital values have softened in more established markets in and around London, we have seen a shift towards investment in the North, with this increased demand leading to properties selling more quickly, meaning bridging finance is not required in as many transactions.”


Could the West Midlands rival London?

Does the industry expect other areas to surpass the South East?

“Manchester is expected to go from strength to strength and has not been held back from fears of Brexit or the various property tax hikes,” said Chris Oatway at LDNfinance.

“Leeds and Liverpool stand out as two cities expected to surpass the South East due to employment growth and the active build-to-rent market.

“Investors have confidence that demand for high-quality, new-build apartments will continue to exceed supply.”

Whitney said that Enness was seeing strong demand from the West Midlands and thought that would continue.

“With the anticipated HS2 link and [the 2022 Commonwealth Games in Birmingham], [the city] has a real ambition to rival London.”

Lucy said that the South East would probably always be the region for specialist finance, but added: “…The North West does have the potential to be a power house.

“As well as the BTL market growth stimulating other forms of specialist lending, HS2 will likely make the region [an] even more attractive proposition – so the potential is huge.”

 

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