May 1st, 2020. Ben Lloyd
How is Coronavirus Affecting the Property Finance Industry?
It’s official, we’ve now entered our third calendar month of government-enforced lockdown during the Coronavirus outbreak, and many of us are now adapting to a new (hopefully temporary) way of life.
However, after being hit hard over the last few weeks, what has all of this meant for the commercial finance industry?
What Effect Have We Seen So Far?
Naturally, COVID-19 has caused lenders to react and re-evaluate their loan offerings, as fewer properties can now be built, refurbished or sold under lockdown. In many instances, we have seen this lead to high street banks and funds reducing their LTV offerings and/or their maximum loan size.
Contrary to this, we have seen a couple of the smaller lenders bang the drum about their LTVs in particular, and how they’re staying the same.
Through the last ten years or so, the specialist finance market has capitalised during times of uncertainty as there is an understanding that, while other sectors of the finance market pause or adjust negatively, someone has to step in to keep developers, in particular, well… developing.
In fact, a number of our key lender relationships are keen to fill the space left by some of the more institutional lenders.
What Do We Expect to See In The Coming Weeks?
Although many are eligible for grants from the government – see our post: How is the Government Helping Businesses Affected by Coronavirus? – we would expect this funding to be insufficient for most – especially for those with just a few months left before a loan repayment is due.
Therefore, in the coming weeks, we expect to see more and more demand for payment holidays and extensions, and a decent uplift in demand for short-term finance options such as bridging loans and development exit finance.
Exit strategies will certainly be affected due to the very real possibility that property values and demand drops in the short-term and expected sale or refinance options are now reduced.
As the social distancing restrictions remain in place, servicing new applications will have to change. Valuers may have to switch to digital processes, rather than traditional in-person inspections, as will estate agents at the opposite end of the journey.
Short-term rents have already seen an uplift as many front-line workers seek to separate themselves from loved ones while conducting key work during the pandemic, and Airbnb has stepped in to help provide housing for 100,000 healthcare professionals under a new global initiative to offer free or subsidised housing for those fighting the virus.
We’re All in This Together, So Let Pure Help
If you’ve found yourself in a tough position since Coronavirus hit, whether this is sourcing funding to begin a project or recouping investment to pay off a loan, we’re here to help. Get in touch today to discuss your finance needs.
Article By Ben Lloyd
May 1st, 2020
Ben is the Director and Co-Founder of the Pure Group and Managing Director of Pure Property Finance.
Following a career in Barclays, where Ben was in the real estate finance team for 8 years, he decided that the market needed a more forward-thinking type of commercial brokerage so founded Pure Commercial Finance (now Pure Property Finance), the first company within the Pure Group.
Ben has extensive experience across the real estate sector and has participated in over £2bn of real estate transactions during the course of his career.
Ben oversees the general strategy at Pure Group and works with the senior leadership team to drive the Group forward. Ben is also on the Executive Committee of FIBA.See more articles by Ben