White Paper – good news for Small Housebuilders

The Government’s White Paper on housing, February 2017, is good news for the smaller developer.

As it sets out to give greater empowerment to Local Authorities to perform, we should see a move for councils to push more, smaller sites through the system – sites that the smaller/medium sized housebuilder will be well placed to deliver on. To that end one might predict that the White Paper opens up an opportunity for the smaller developer to play a far greater role in the vision for future new homes in this country.

With empowerment comes expectation and Local Authorities will be measured on what they can deliver. We can see that smaller sites will be an increasingly critical element of the mix to ensure councils meet targets.

There will be an impetus for councils to push more small developable sites through the planning system quickly to increase supply and this will inevitably generate opportunities for SME builders.

To achieve this intended increased capacity will inevitably put pressures on SMEs sourcing property development finance. While new opportunities might be created for smaller developers, the property development finance still needs to be in place to take them up. At Wolsey we are well placed, with over twenty years experience in this specialist field of development finance for housebuilders, to advise and support developers looking to a bright and busy future. Do talk to us.

Stephen O’Brien, MD

Property Development Finance not a barrier

“Securing the funding for development is not the issue,” explains Stephen O’Brien, MD of Wolsey, specialists in property development finance to housebuilders. “It is a matter of an experienced eye recognising the potential of what’s before them. If the housebuilder can demonstrate a sound proposal and level of delivery expertise, Wolsey will fund it. ”

The Riverside scheme, Hereford, is a prime example, explains Wolsey: “initial bank enquires for property development finance drew a blank, but on approaching Wolsey the proposal’s potential could be appreciated, and from that moment the residential development finance could be secured.” Now the scheme is nearing completion, with almost half the 18 apartments occupied. The finished building is striking in design rising on an elevated podium above the River Wye.

Article appears in Housebuilder, 2017.


2017: Some bright Resolutions

While Brexit might have dominated political and economic thinking for the last 6 months of 2016, the Prime Minister is making it clear that she will not be so focused on this one issue in 2017 to the detriment of addressing domestic issues closer to home. And she has indicated that few issues will matter more than tackling the shortage of affordable housing.

This is good news. The Government has announced the package on starter homes and we continue to recognise the benefits of Help to Buy for purchasers, whilst further announcements are expected to accelerate housebuilding to meet demand. We, at Wolsey, are here to support developers with residential development funding where opportunities are there.

Good fortunes for the year ahead and a profitable 2017.

Stephen O’Brien

No Shortage of Finance

In its October issue, Housebuilder Magazine looked at the challenges of raising development finance post EU-referendum. Wolsey, with over 20 years experience funding SME housebuilders, was well positioned to emphasise that finance would continue to be available for funding good product in good regional locations.

Stephen O’Brien, MD of Wolsey said: “The Brexit decision does not take away the demand for homes and that will always drive our lending approach to housebuilders who should be encouraged in this market to come to specialists who understand their needs.”

A “prime example”, explains O’Brien, is Wolsey’s current funding of St Dominic’s, Stoke-on-Trent. “Here we have a scheme of 23 three and four bed houses in the popular residential area, coming to the market through Dunedin Homes & Developments, who have a reputation for providing quality and value for money. At Wolsey, there is no shortage of finance for funding such developments.”

Housebuilder Magazine, 2016

Stephen O’Brien, MD of Wolsey, comments on the BREXIT vote, its implications on UK residential development and particularly SME funding

“One can be clear about one thing, for SMEs operating in the housebuilding sector,  the result of the BREXIT vote has led to confidence in funding developments dropping which is bad news.

Uncertainty makes times challenging, awkward and tough.  As Britain works through the implications of its exit from the European Union, funders are facing an extended period of uncertainty. We have seen certain Credit Committees have tightened terms; the effect being that SMEs operating in the housing sector are finding funding more difficult to secure.

I’ll look at the situation in the regions in a moment, but it is London that undoubtedly faces the most onerous task in maintaining levels of growth in new home build.  The market segments where Help-to-Buy supports sales remains strong. However, in other segments, the runaway price levels and the drag of Stamp Duty continue to be strong headwinds on growth.

There are clear issues with, for example, two bedroom flats in certain London locations where prices are making them unaffordable to first time buyers, as compared to other parts of Greater London where Help to Buy at more realistic prices for the same product is making these locations affordable. Discounting is happening in parts of London where these anomalies occur. This is leading to funders with significant exposures to these markets facing up to potentially difficult situations for the first time in a number of years.  Any uncertainly and potential reduction in the interest from the international market for London product prompted by BREXIT only further heightens this concern. It will be interesting to watchhow these funders react which again will directly impact on the availability of funding for SMEs.

Whilst the devaluation of sterling since the vote may assist , there looks to be a significant overhang of future product at prices of c. £1m which is likely to impact on the London market unless confidence returns to 2014/15 levels. For example, a key issue will be the impact of BREXIT on the City.  If, as Brexiteers claim, it will be a positive one and not a negative then the overhang will dissipate.  Stamp Duty (as outlined above) remains a significant factor.  Domestic or international investors are averse to paying the levels of stamp duty sought at the best of times, let alone in a period when London may be repositioning itself in the world outside of the EU.

Outside of these London ‘hotspots’, the impact will be far less strongly felt.

The regions have not, for the most part, seen the huge uplift in prices of the South East.  This, with inherent demand for product and help-to-buy initiatives, does provide reassurance for developers that there will be a market for the right product designed for the right location that is affordable. Funding will be available from Wolsey and other lenders for those schemes.

A prime example is Wolsey’s recent funding of St Dominic’s a scheme of 23 three and four bed houses in the popular residential area of Hartshill, Stoke-on-Trent, Staffordshire, which will come to the market through Dunedin Homes & Developments, who have a reputation for providing quality and value for money.

Demand is of course the key factor here and it is why Wolsey believes the housing market in these areas will not run into recession.  The UK’s failure over the past decades to supply good new affordable homes in the sort of volume needed to keep pace with demand will underpin the future market for years to come, BREXIT or no BREXIT.

Wolsey is actively writing new business with SME’s in these challenging times.”

Stephen O’Brien, MD Wolsey, September 2016