As originally published in Financial Reporter.
The ongoing uncertainty around the UK’s departure from the European Union is continuing to have a dampening effect on the property market, which is bad news for developers who might be struggling to sell properties or suffering from down valuations.
The headline of the RICS December market survey was “housing market on hold for now” and the report said that the sales outlook for the next three months is the gloomiest it has been for 20 years.
RICS said that activity indicators from surveyors continued to slip in December with sales volumes dwindling and a net balance of -28% representing the poorest reading since the series was formed in 1999. However, the 12-month outlook is a little more upbeat, which suggests that some of the near-term pessimism is directly linked to Brexit and, while there is no guarantee of greater clarity any time soon, there are indications that the property market could experience an uplift, when we enter a more stable political environment.
So what options do developers have in the short-term if they have deadlines to pay off development finance but are also struggling to shift units at a desirable price?
In this situation, a development exit loan could provide the breathing space they need to transition from a development at their own pace. It’s important to allow a reasonable timeframe to market and sell the properties and, at Daven Trust, our development exit products are available on a three-year term with a two-year ERC. There is also the flexibility to sell an agreed percentage of the properties during this ERC period without penalty, giving the client a product that works on their terms.
So, don’t let your developer clients be suffocated by a stagnant property market. Consider their options with a development exit loan that can provide them with the flexibility and breathing space they need to successfully exit their current development and move onto their next project.