Development Finance Manchester
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Property development market update
The success of the UK’s Covid-19 vaccine rollout is providing renewed hope across the property sector. Demand for housing is rebounding, and the government’s new mortgage guarantee scheme, facilitating the return of low deposit mortgages (95% loan-to-value products), is expected to provide the market with a further boost.
A recent spate of new planning laws is also good news for property developers. In August 2020, the government announced a loosening of planning rules and changes to permitted development rights (PDR), making it easier to build properties and make changes to existing ones. Up to two storeys can now be added to buildings without full planning permission, for example.
In addition, air rights (owning the rights to the air above a property that could reasonably be used) mean developers can now build homes for sale or lease, on top of commercial premises, high above the crowded streets of the big cities.
All of this means increased opportunity for property developers to build more. From housing to leisure to commercial property, there has never been a better time for property developers to obtain finance for a development scheme in Manchester.
Property development in Manchester
Following an unquestionably challenging year, the property development market has remained resilient throughout 2020 and 2021 to date. The construction sector has been busy despite the challenges of three national lockdowns, and all schemes reported in the city last year were brought to fruition. The two most noteworthy sectors for Manchester in 2020 were undoubtedly residential and office space.
The housing market has continued to perform staggeringly well, and its growth remains one of the most impressive in the UK. According to Hometrack’s UK Housing Price Index, the annual rate of house price growth in Manchester was 4.3% in 2020, the highest since April 2017, and the city has the second highest inflation rate in the UK (after Liverpool) at +6%, over twice that of London (2.9%). It’s no surprise then that 35 schemes completed during 2020, providing the highest level of residential properties in at least 18 years, and over 12,000 residential units are currently under construction for the third consecutive year, despite almost 5,000 new homes being delivered to the market.
Nearly 1.2m sq. ft of office space was constructed in Manchester last year, the largest amount since 2008’s global financial crisis (with five new developments accounting for nearly half of it), leading to the UK’s highest overall vacancy rate of any city in the fourth quarter of 2020, at 13.8%. Whilst demand for office space is expected to boom later this year as people return to the office, space in the city centre for further commercial property development is currently limited, with only three office schemes in the pipeline for 2021.
Types of property development in Manchester
- Light refurbishment – minimal rather than structural changes to the property, such as decorating throughout or a new kitchen.
- Heavy refurbishment or renovation – more extensive changes and upgrades, including new electrics, extensions, loft conversions or converting a house into flats.
- Permitted development – generally a total overhaul of existing commercial properties, such as converting an office into flats, which don’t require planning approval from the local planning authority, but do require a permit.
- Ground-up development projects – where development finance is used to finance both the land purchase and the build costs (build costs first). This is the most comprehensive type of property project and normally involves starting with an empty plot of land (or a building that needs to be demolished).
Why use development finance to build in Manchester
There are several reasons to secure development finance to fund your Manchester property project:- Debt is always cheaper than using your equity (unless you have access to a lot of your own cash). If you put in less capital your returns are actually likely to be higher.
- You can take on bigger projects, which would otherwise be out of reach.
- You can run with multiple projects at the same time, or start a new scheme before your existing one has sold or fully sold, increasing your potential profits.
Challenge and opportunity?
If you have the right access to development finance, it’s clear that there’s a great deal of opportunity for property development within Manchester. But securing funding continues to be a challenge, with the 2019 Federation of Master Builders’ survey revealing that more than a third of SME developers (39%) say access to finance is a major barrier to their ability to build more. Concerns about the level of loan refusals are also at their highest in three years.Brickflow solves this challenge by providing instant online access to development finance. We search the market in real-time, providing loans from lenders you can trust, empowering you to borrow smarter, mobilise quicker and ultimately get ahead of the game, in a city where space may be limited but opportunity is rife.
To talk to us about your development finance needs for a project in Manchester, or anywhere else in the UK, give us a call on 020 4525 6764, or email info@brickflow.com.
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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