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Bridging finance could be key to London’s house building target

Posted: March 6, 2018

The mayor of London, Sadiq Khan, wants 65,000 homes to be built each year in the capital, approximately double the current rate of housebuilding. Small developments of between one and 25 homes could, according to Sadiq Khan, contribute 24,500 homes a year to his target.

Many small housing development sites are developed by small to medium size builders. In a recent survey, 57% of small to medium builders said that accessing finance was their biggest obstacle to starting house building development. Many developers cannot get loans from a mainstream bank.

Stephen Wasserman, writing on the website propertyweek.com in February 2018, says that the key to obtaining finance could be from short-term bridging lenders. Bridging finance can be used to both purchase development land and to fund the construction. A loan can be structured to the timescale of the development so that it can be repaid when the houses are sold. Some finance packages can include staggered payments that release finance for the various stages of the development. Interest payments can be structured so that interest is only paid when the bridging loan is repaid.

For this type of bridging finance, there is often a minimum figure. Some large lenders will not lend below £750,000 but many specialist lenders are offering bridging finance deals at £500,000 or below.

A developer who wants bridging finance can be helped by a bridging finance broker who can source the best housing development loans.