- 31st December 2022
- Posted by: DMM
- Category: Uncategorised
As we reflect on the past year, it has certainly been quite a time for our country and property development funding in 2022. We have had the beginnings of a recovery from the Covid 19 pandemic, Putin’s invasion of Ukraine, no less than three Prime Ministers, double digit inflation, widespread industrial action, economic recession and, of course, the sad passing of Queen Elizabeth II.
There were some highlights of course as we had chance to celebrate the Queen’s Platinum Jubilee early in the year and her remarkable 70 years as our monarch. The ‘Lionesses’ triumphed in the Women’s Euro’s and if you were wanting to sell your home, then you weren’t going to be short of interest.
Despite all the ups and downs, we have seen ever increasing demand for property development funding in 2022 and a continuing appetite from lenders to support projects.
The beginning of the year saw strong demand for property and with a limited available of new instructions, consequently property prices soared. In the early summer new property instructions were creating a flurry of multiple viewings and often an eventual sale price well over the original asking price. Doesn’t that seem a long time ago?!
According to the Nationwide Building Society, average house prices rose by £20,000, from £255,556 to £273,751, between January and August 2022.
Property development funding benefitted from this period with historically low interest rates helping the bottom line and with valuers having confidence in projected GDV’s, we had fewer issues during the loan process. Speed of completion did become important as the nature of strong property price growth also increases the level of competition for new sites. The availability of 100% property development funding in 2022 increased. Our JV lenders raised their maximum loan criteria, equity investors widened their appetite and other structured finance solutions also becoming available.
But all good things come to an end and with the Bank of England increasing the bank rate during 2022, as did the affordability of home owning. Following the ignominious end to Boris Johnson’s reign as Prime Minister, we had the sudden impact of Liz Truss’s disastrous mini budget at the end of September exacerbated the jump in mortgage rates.
As we look forward to what 2023 will bring the UK property market, we can at least take some encouragement from the latest Rightmove House Price Index which reported that viewings to their platform was up 11%. This perhaps suggests that people do want to move but maybe biding their time before committing. With the number of new property instructions remaining at low levels, property developers can be confident of continued interest from prospective buyers. Lenders are also still demonstrating a willingness to invest in new borrowers and December was busier than ever in loan progression for us.