"In 2017, bridging has turned out to be a ray of sunshine in the property finance world"
Gross annual bridging lending broke £5bn by the end of 2017, up 24% on 2016 figures, according to findings from West One’s Bridging Index.
Total lending surged in the fourth quarter, resulting in a 6% rise in annual lending, up from £4.7bn in Q3.
West One says the bridging sector has had a robust 2017, in spite of a comparatively flat wider housing market and the first interest rate rise in 10 years.
Its data shows that higher volumes of smaller transaction sizes persisted throughout the second half of 2017. Average loan sizes remained between £600,000 and £800,000 in the quarter and confirming a longer-run average trending to below £800,000.
As seen in previous editions, greater buoyancy in property markets outside London and the South East are offering property investors better rental yields and even some opportunities for capital appreciation at a time when the capital city is offering neither.
Marie Grundy, sales director at West One, said: “In 2017, bridging has turned out to be a ray of sunshine in the property finance world, with a series of record performances throughout the year. The industry shrugged off the headwinds buffeting other parts of the industry, to deliver a final lending total of £5bn for the year. At West One, our short-term lending grew with similar strength to a book of around £450m and record volumes of transactions in the year.
"What’s perhaps most encouraging is to see a breakthrough in the diversity of that growth, with more and more opportunities being found regionally. Where I am, in the North West of England, places like Greater Manchester and Merseyside are increasingly vibrant cities that are benefitting from urban regeneration and moves away from London, like the BBC made a few years ago. That means that these, along with Birmingham and the East Midlands that are extended commutes from London, are attractive places to live. Opportunistic investors looking for better returns are finding them here, and bridging is well placed to help them capitalise on those.
"Looking ahead, we remain confident in further growth of the bridging market not only through further regional expansion, but also as SME developers seek small project funding for housebuilding, to meet the Government’s new home targets. With many finding it hard to get funding for projects under £1m, or to finance property acquisition whilst planning permission is being obtained, bridging is well-placed to support them.”
Danny Waters, CEO of Enra Group, added: “The bridging sector has performed excellently in 2017, despite the backdrop of concern around the progress of Brexit negotiations, sluggish economic indicators and interest rate rises. Whilst a few lenders have notably taken 2017 as the time to exit bridging, we are generally seeing more competition in the sector, which both drives innovation and keeps pricing attractive for customers. That continuing adaptation to conditions and to borrowers’ needs has been a key strength for the sector in the decade since the financial crisis. Providing the flexible funding options that property professionals need, especially small developers, is the key to bridging continuing its growth trajectory, however the Brexit negotiations and the wider economy progress.”