There is a crisis in property development finance in the UK.
Property developers and house builders are being starved of cash by the major banks and this means that the UK population is being starved of new homes.
Even the most experienced and best connected property finance brokers are struggling to place deals which 18 months ago a number of banks would have been competing for. We are not talking about highly speculative schemes for inexperienced operators but very profitable, well located developments that experienced developers can put cash into.
Still the banks won't lend, because they have branded all forms of development as "very high risk" without actually looking at the individual profile of the deal. This is in complete contrast to their attitude before 2008 of barely assessing risk before lending, just because another bank was in the background competing for the business.
To illustrate the point, only one of the major high street banks will consider funding developments for new customers and even they have decided that they will not fund ANY developments of flats/apartments anywhere. How extraordinary is that, and what an indictment of the mess the banks have got themselves into.
There are a few smaller banks still lending, and thank heavens for them. They are doing their best but of course are overwhelmed by enquiries which is leading to log jams and long delays for approvals and drawdowns.
The picture for commercial mortgages is not too different. The banks will find every reason not to lend rather than approach a proposition with an open mind.
All this would indicate that there is a huge opportunity for new banks to come in to property lending in the UK and to write excellent, low risk, high reward business at a time when there are signs of improvement in the property market and the economy as a whole.
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