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    Property development in Birmingham

    Despite the obvious challenges of 2020, property development activity remains strong across the UK’s second most populous city, and cranes continue to fill Birmingham’s skyline. Throughout the pandemic developers have been pushing forward with schemes, contributing to a healthy and exciting development pipeline.

    Regenerating the city

    The buzz surrounding 2022’s Commonwealth Games, and the arrival of the high speed rail network HS2, means Birmingham is continuing to attract significant investment, as well as demand for housing, as young professionals and families flock to the city for its employment opportunities and affordability.

    HS2 has been dubbed the UK’s most important infrastructural development in a generation. It is set to revolutionise connectivity between Birmingham and 8 of the UK’s major cities, including Manchester, Sheffield and Leeds, whilst reducing the commute time to London to just 49 minutes, and transporting an estimated 26,000 people per hour.

    £724 million will also be invested in the area surrounding Birmingham’s Curzon Street Station, with an ambition to create 36,000 jobs, 4,000 new homes, and 600,000 square metres of commercial development. Due for completion in 2026, it will coincide with the completion of Paradise, a 1.8 million sq. ft mixed-use development, comprising commercial, retail, leisure and hotel space.

    A £700 million project in its own right, it’s another mammoth investment for the city, and such ambitious regeneration plans can only mean increased interest and confidence in the city, translating to plenty of opportunity for the property development industry.

     

    Types of Birmingham property development

    Residential was undoubtedly the standout sector for property development in Birmingham in 2020, with completion at a 10-year-high. According to the Deloitte Crane Survey, 2,072 units were brought to fruition, which is well above the city’s average for the past decade (607 per year), and 2021’s pipeline looks healthier still. With house price inflation in Birmingham remaining steady (+4.2% YoY vs national average of 4.3%), developers are confident that the housing shortage and the city’s ever popular appeal will continue to drive demand.

    Development of student accommodation also reached a record high, with 1,458 units completed, well above the 10-year average. The largest of those was Lancaster Circus in Eastside, delivering 1,023 units, followed by Altura, a £41.5m scheme in Westside, providing a mixture of 435 ensuite clusters and individual studios, complete with retail units, a gym and communal social and study areas. The picture however looks very different going forward, as uncertainty due to Covid-19 reigns over students and universities, reflected by a much weaker pipeline for 2021, with just 399 beds currently planned for the year.

    Office space was one of the casualties of the pandemic in Birmingham in 2020, with 520,000 sq. feet of office space planned for completion, and less than half of that delivered. This was a huge 75% drop in completion from 2019’s record year, as construction stalled and caused inevitable delays, although completion for all those schemes is now expected this year. Looking to the positives, over 1 million sq. ft of office space is still under construction, of which 51% is already pre-let, and 11,700 new businesses were registered in Birmingham last year, the highest number after London, showing the city’s entrepreneurial spirit is still going strong.

     

    Opportunity for developers in Birmingham

    Whilst the pandemic has undeniably had a significant effect on property development in Birmingham, it’s clear that there’s a huge amount of opportunity going forward. It’s a great time to be a property developer, if you have access to the right development finance, which is often one of the key barriers to success for SME developers.

    Property development finance is a short-term loan used to fund construction or refurbishment projects. It’s a good idea to take out a loan because using someone else’s money is always cheaper that using your own, unless you’re sitting on a huge pile of cash. Access to more funds also means you can take on bigger projects that might otherwise be unrealistic, and run several schemes simultaneously or before one has sold, increasing your portfolio and profits.

     

    How to finance property development in Birmingham

    The development finance market is a fragmented one, and it’s difficult to know where to start in your search for a loan. Brickflow solves this challenge by providing instant online access to development finance. Here’s our latest list of trusted lenders.

    We search the market in real-time, providing loans from lenders we know and trust, empowering you to borrow smarter, mobilise quicker and get ahead of the game. It’s the developers who can secure quality finance quickly, who will ultimately reap the benefits of the most competitive development opportunities in Birmingham, and further afield.

    To talk to us about development finance for a project in Birmingham, or elsewhere in the UK, give us a call on 020 4534 5227 or email at info@brickflow.com

     

    Get ahead of the game

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    *across our last 10 transactions where the borrower already had an offer

    FAQs

    Your Questions Answered

    HOW DOES BRICKFLOW CALCULATE DEVELOPMENT FINANCE?

    Development finance is the most complicated of all property loans to calculate. There are a lot of variables to consider, and these loans are underwritten more subjectively than a regular mortgage.

    We use the same loan modelling process across all lenders, to allow easy comparison between lenders. Each lender will have their own model, which will constantly be tweaked, so the loan figures provided on the Brickflow results screen may differ to the final quotes provided by the lenders. However, we constantly monitor our estimates against the actual quotes received to ensure any differences are minimal.

    The main criteria to how a development loan is calculated are:

    • Loan to Gross Development Value (LTGDV)
    • Loan to Cost (LTC)
    • Minimum client equity contribution
    • Day 1 land loan cap

    The lender determines the loan amount from a combination of the above factors and delivers a final combined amount. Other factors that can affect leverage and pricing are; micro geography, asset type, lender loan book exposure, development experience, build type and more.

    HOW DOES THE BRICKFLOW LOAN APPLICATION PROCESS WORK?

    Once you have shortlisted your lenders and want to make an application you will be asked to complete further details on the project; your development experience, a development appraisal and property schedule. This will automatically be sent to the lender shortlist (up to 5x lenders), where these lenders are encouraged to submit their best loan terms.

    These lenders will conduct a preliminary underwrite and offer their final loan terms, decline to offer or ask more questions. Once all the loan terms are received, borrowers can ask any questions to the lender or Brickflow. When you have selected your preferred option, that lender will move to their credit approval process.

    Once the loan is credit approved, the lender will instruct their professionals; valuer, IMS and lawyers.

    There is a fee of £ 995 payable to complete the full application, but this is refunded when the loan completes or in the event that the chosen lender then declines the application.

    HOW DO YOU RANK THE LOANS?

    Loans are ranked in order, from largest to smallest. When the loan amounts are the same, the Brickflow software ranks them in price order, with the cheapest loan first.

    HOW LONG DOES IT TAKE TO GET A LOAN?

    Once you’ve selected your 5 lenders and your project goes live on Brickflow, bids can be received within as little as 2 hours. It normally takes up to 48 hours for all 5 bids to come in, and sometimes a little longer if it’s a complex case or there is incomplete information.

    The info the lenders need is clearly detailed in the online Project Appraisal but primarily includes; your development experience, development appraisal and a property schedule.

    Once you have selected your preferred bid, there is a fee of £ 995 payable to complete the full application. (This is refunded when the loan completes or in the event that the chosen lender then declines the application.)

    From paying the application fee to full credit approval, it normally takes 2-3 days, although the quickest credit approval on the platform so far is 4.5 hours

    Credit approval to loan completion is mainly dependent on your professional team. If your lawyer works quickly and collaboratively with the lender's professional team, you can complete 3-4 weeks later.

    The industry standard to complete a development loan is close to 6 months. With good borrower co-operation, Brickflow can do it in 4 weeks from start to finish, but 8 weeks is more typical.

    CAN INTRODUCERS USE BRICKFLOW?

    Absolutely. We work with estate agents, brokers, IFAs, architects, lawyers, and any other property professionals. Click here for our website for partners.

    HOW DOES BRICKFLOW GET PAID?

    Brickflow receives a commission from the lenders, but only on completion of the loan. We are therefore strategically aligned with our borrowers to ensure their loan completes successfully.

    Any commissions are built into the results you see on screen and will be included in the loan bids you receive in the Deal Forum and in the credit-approved loan offers. There is no separate payment due.

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