The Prime Minister's pledge to ‘build, build, build’ may be a leapfrog moment for UK housebuilding, but only if a key condition is met. Yann Murciano, CEO at development finance and bridging lender Blend Network argues that Mr. Johnson’s promise could be a game changer if it goes hand in hand with greater access to finance for the tens of thousands of small property developers and construction companies left bruised by the pandemic.
UK average house prices have risen by over 160% in real terms since the middle of 1996. Home ownership remains around its lowest level for a generation. Among political leaders, policymakers and commentators there is a broad consensus that these problems are largely down to one failing: decades of undersupply of housing. Now, the Prime Minister Mr. Johnson has announced a raft of new measures to help the UK on the road to recovery following Covid19, including the construction of thousands of new homes and ‘the most radical reforms to our planning system since the Second World War’.
Mr. Johnson’s pledge may be a leapfrog moment for UK housebuilding, but only if his promise to ‘build, build, build’ goes hand in hand with greater access to finance for the tens of thousands of small property developers and construction companies left bruised by the pandemic. According to a report by the Home Builders Federation titled ‘Reversion the decline of small housebuilders: reinvigorating entrepreneurialism and building more homes’, post-war housing supply peaked at the same point that entrepreneurial SMEs in the sector were flourishing. According to this report, in 1988 small builders were responsible for 4 in 10 new build homes compared with just 12% today, while in just the period 2007-2009, one-third of small companies ceased building homes. Availability and terms of financing for residential development became extremely difficult for small housebuilding companies over the decade following the Global Financial Crisis as lenders drastically changed their attitudes to the sector. Now the pandemic has delivered another blow to small housebuilders who may be described as the life and blood of the UK’s housing sector.
In order for Mr. Johnson’s promise to success and indeed tackle the chronic failure of Britain to build enough homes, a concrete plan of action is required to enable SME housebuilders to get access to funding. And here, we strongly believe that alternative finance providers and peer-to-peer property lending platforms can and must be part of the solution as effective way to channel funding from the private sector into housebuilding activity. Decades of near-zero interest rates followed by the most recent market volatility have left savers and investors desperately looking for yield and a place to park their hard-earned cash. These savings could be channeled into housing projects enabling investors to earn a decent return while also doing good and helping build more homes. Blend Network offers investors 8-12% return p.a. on property-secured loans, with its loans being filled within minutes of being listed on its platform due to the large number of investors wanting to lend on its loans.
In summary, the market welcomes Mr. Johnson’s enthusiasm to build more homes, but what we need next is a concrete and tangible plan of action that puts finance at the center of its implementation strategy. We at Blend Network have been actively lending and supporting SME property developers and housebuilders during Covid19. Indeed, we even agreed funding for our two largest-ever projects during the pandemic. We remain open and keen to support the Government in its building activity and want fund more deals. Dear Mr. Johnson, we are waiting for your call!