South Coast: Property funding outlook still 'gloomy'

The immediate outlook for property developers along the South Coast remains gloomy as banks continue to seek to reduce their exposure to the property market, reports solicitors Adams & Remers.

Adams & Remers, whose clients include investors, lenders and developers along the South Coast, points to anecdotal evidence from two large institutional lenders who are both under instructions to turn down any requests for funding to develop or build property, despite an increasingly buoyant local property market.

David Platt, a partner and head of Adams & Remers Commercial Property team said: “There are developers across the South East sitting on land banks that they wish to develop and bring to the market, particularly now as the housing market is beginning to show signs of recovery. However the banks continue to show no appetite to fund such development. Developers can unfortunately expect to continue to see a near complete lack of funding for quite some time yet.”

However the picture isn’t entirely gloomy. There are a number of niche areas where developers can still relatively easily find access to funding.

“Developers are finding it relatively easy to obtain funding for healthcare related projects as the government or primary care trusts will usually fund all or part of the development,” says Platt.

“Developers are also seeing profitable work in developing affordable housing schemes, including accommodation for key workers and students. Developers will buy land and develop, with a registered social landlord, university or employer funding the project via staged payments. The only downside is that any profit the developer makes is held back until the project is completed.”

Adams & Remers reports one interesting twist in funding property development. “If a company wished to borrow to finance the acquisition of new build premises for the company’s own use it should be able to obtain bank finance. Problems only arise if the property developer itself is seeking bank finance for the development, and there seems to be no light yet at the end of that tunnel.”