Development Finance in Newcastle
Find out how much you can borrow for your Newcastle development now.
A fast growing city
The city’s population is projected to reach over 310,000 by 2030, an increase of 6% from 2016, while the city region population is projected to be 2.75 million by 2030.
Gateshead and Newcastle are the key employment areas offering high levels of accessibility and connectivity. Some 299,000 people work in the urban cores and 45% of employees travel from outside the two local authority areas.
A major redevelopment programme, thriving economy and surrounding environment ensure Newcastle regularly features as one of the best places to live; it was recently voted the best city for quality of life and the UK’s happiest city. These accolades make Newcastle a great location for property developers ready to access property development finance.
Overview of the property development market
Newcastle hosts a number of corporate headquarters and has strengths in learning, digital technology, retail, tourism and cultural centres. Investment property is typically terraced housing, with imposing Georgian structures in central areas. New build developments, student lets feeding Newcastle and Northumbria universities and large family houses in the outer areas all contribute to growing property development opportunities.
The North of Tyne devolution deal, agreed in 2018, will appoint a mayor for Newcastle, North Tyneside and Northumberland, and bring an extra £600 million of investment to the region over the next 30 years. This new Combined Authority has power over land acquisition and disposal, and will establish Mayoral Development Corporations to serve North of Tyne’s housing and regeneration focus.
The North East has the lowest average house price at £143,000, and the average property price in the Newcastle upon Tyne postcode area is £194k (increasing by 7% over the last 12 months). Newcastle-upon-Tyne house prices in maps and graphs.
Low property prices are unsurprisingly tempting people to relocate to this location. Commercial office space in the North East is around 30% cheaper than other UK cities and nearly 68% lower than London. Residential properties are some 37% below the national average.
With one of the best graduate retention rates in the country (36% of all graduates settle and work in the city), Newcastle is recognised as a fast-growing region for new start-ups, prompting increasing demand for property from young professionals, increasing rental prices and yields.
Ascend Properties says Newcastle witnessed its largest year-on-year rental increase across the Build to Rent sector, achieving current average rentals at £858, 17% up on the previous year.
Only recently, international technology firm Xplor announced it was setting up a new customer service base, creating over 200 jobs, boosting demand for property.
Significant developments
City centre development schemes include a £30 million plan for a four-star hotel, bar, restaurant and nightclub wrapping around Grey Street, Mosley Street and the Cloth Market, and a £11.5 million proposal to turn the disused Pilgrim Street fire station into a five-star hotel. The higher-value scheme will refurbish several listed buildings, demolish two non-listed sites and create three separate roof terraces.
Local business The Morton Group has 206 residential units in for planning, due to start or on site, including Regents Plaza Apartments, a conversion of nine-storey Eagle Star House in Gosforth into luxury apartments and duplex penthouses.
The firm also recently gained planning permission to create a community of homes at Sycamore Square, on the site of the former Sanderson Hospital in Gosforth, and Regent Manor in Newcastle.
Hyhubs has transformed Newcastle breweries’ old stables into the city centre’s first co-working space with a unique courtyard, a suite of meeting rooms and a tiered-seat lecture theatre. £1.5 million has been spent uplifting Haylofts which also houses 21 natural light-filled and high ceiling furnished offices.
The city’s Bigg Market is undergoing a transformation. Six years ago, a £3.2 million development package was announced, following news the Heritage Lottery Fund backed plans to regenerate the historic site, which includes 31 listed buildings. Now a Newcastle leisure group is working with NE1 Ltd to progress this redevelopment project.
Monument Real Estate is spending more than £8 million to purchase 1-2 Cathedral Square in Bigg Market. Described as a ‘big ticket project’, commentators suggest ‘it will give a new future to a building of major significance’.
A similar regeneration catalyst is the ‘world class’ £260 million arena, exhibition centre and hotel complex that’s been approved for Gateshead Quayside. Councillors were advised the complex would attract an extra 400,000 visitors to the area each year, adding over £60 million annually to the local economy.
Newcastle’s residential landlord Grainger has acquired a £57 million Quayside housing development – The Forge – a build-to-rent asset with 283 rental apartments and a ground floor commercial unit. The Forge is the first Forth Banks regeneration project to be completed and the one seven-storey and two nine-storey properties cover over 200,000 sq ft in the Stephenson Quarter.
The Whey Aye – the biggest observation wheel in Europe (at 460 ft) is due to open on the Newcastle side of the Tyne in spring 2024 and councillors have given the green light for a major new complex of bars, restaurants and offices to be built in East Pilgrim Street.
The £110 million Pilgrim Place development includes two 10 and 12 storey office buildings, a 221-space car park and a large public square at its centre. It is hoped the complex will create 2,300 jobs in the city centre.
Plans have also been submitted to turn a former bank headquarters on Newcastle’s Collingwood Street into a multi-million pound mixed residential and hospitality development.
Growth potential
Newcastle and developers will undoubtedly benefit from the North of Tyne devolution deal that‘s set to bring an extra £600 million of investment to the region over the next 30 years. This and the council’s Core Strategy to improve the range, quality and quantity of retail development and provide more high-spec, serviced and flexible office space for the city’s emerging tech and media sectors, underlines the potential this city has to offer.
Opportunities for developers
Current major planning applications (open to consultation) include;
The Pattern Shop, South Street – demolition of late 20th century building to south, erection of new energy centre, refuse and cycle store.
Newcastle General Hospital, Westgate Road – outline for mixed-use development. Principal uses include research and academic facilities, NHS and other health-related facilities, residential institutions, residential dwellings, non-residential institutions, business and commercial uses, community and leisure amenities and small scale retail.
Sandyford Service Station, Sandyford Road – demolition of existing retail premises and erection of a four-storey building to accommodate ground floor retail unit (133sqm) with student accommodation above comprising 14 en-suite beds and shared kitchen space on each floor.
A prime plot of office development land is for sale on Newcastle quayside. Designs for a 12-storey office were unveiled last year, transforming the site which has been empty for a decade.
City centre transformation proposals
It’s hoped the council’s Capital Programme, a two year £250 million investment in projects across the city, will be a springboard for private funding. Alongside supporting the economy, the focus is on making Newcastle more accessible and inclusive. More than £5 million is being invested in road and pavement improvements and over £2 million in grants for disabled facilities. There’ll be new residential schemes for people receiving social care support and income generation from property assets.
There are plans to secure the long-term future of critical infrastructure along the River Tyne, specifically around Walker Quay, and the north bank of the Tyne Enterprise Zone with offshore wind investment for green energy. New schools, transport infrastructure and other facilities will support the delivery of new homes on strategic housing sites.
How to finance property development in Newcastle
Newcastle’s plans and developments illustrate the vast potential this city has to offer and if you’ve made a decision to invest in this area, it’s now time to decide how best to access your development finance.
There are two options – be restricted in your lender choice, opting for either a bank you’ve been with before or follow a recommendation from a contact. Spend ages preparing your application, wait a while for a decision and then realise once you have a quote, you’ve nothing to compare it against. Repeat the process again or even three times, just so you have something to compare with (that’s if you get a development finance quote), and then pick what you think is the most competitive offer. You may never really know what’s best as your choice is limited and all banks having different lending criteria.
Or contact Brickflow. We’ve done the legwork for you by sourcing nearly 30 lenders, connecting borrowers and lenders in seconds. And our single, uniform loan application format, universally embraced by all our lenders, overcomes inconsistencies. Here’s our latest list of trusted lenders.
Simply, enter your site loan requirements and receive instant lending estimates from compatible lenders. You can select up to five lenders to receive your project appraisal, which is completed online, just once, and shared with those you’re keen to hear from.
Once the loan terms are in, select the best offer and continue with your final application process.
Why grapple with long-drawn out development funding processes, inconsistent application formats and slow lending protocols? Searching the market alone for loan estimates can take up to six weeks; we deliver them in the time it takes to boil a kettle.
Such is our confidence in the platform, we believe Brickflow offers ‘probably the best development finance rates in the UK’ helping you raise capital quickly.
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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