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.
Wednesday, 19 August 2009
Thursday, 13 August 2009
When Will UK PLC Emerge From Recession?
The news today that France and Germany recorded growth in their economies in the last quarter should be good news for the UK.
However, it should also embarrass our banks.
A chronic shortage of credit in the UK is causing our economy to remain fragile and in recession. Those responsible for this lack of credit are primarily the High Street Banks - Barclays, Lloyds, RBS and HSBC. It is their over cautious and negative lending policies that are putting thousands of businesses under every month. The banks have forgotten that they owe their very existence to these people that run these businesses and who they are making suffer so cruelly.
Something that the French and German banks have not forgotten.
UK business will not forget this harsh treatment by the banks they depend on to create the economic growth so badly needed.
However, it should also embarrass our banks.
A chronic shortage of credit in the UK is causing our economy to remain fragile and in recession. Those responsible for this lack of credit are primarily the High Street Banks - Barclays, Lloyds, RBS and HSBC. It is their over cautious and negative lending policies that are putting thousands of businesses under every month. The banks have forgotten that they owe their very existence to these people that run these businesses and who they are making suffer so cruelly.
Something that the French and German banks have not forgotten.
UK business will not forget this harsh treatment by the banks they depend on to create the economic growth so badly needed.
Wednesday, 12 August 2009
Property Development Finance Case Study
Our developer client had identified a site and agreed a loan facilty with his bank. The basis of this facility was that the developer would put in all his funds first, with the bank then providing their share. The client bought the site with his own funds and started building. Once he had injected all his funds he approached his bank again to activate the agreed facility to complete the development. At that stage the bank refused the request, as their policy had changed. This left the developer in a desperate situation with a part completed site with no prospect of finishing the work through no fault of his own. No other high street bank was interested in helping him.
Fortunately, the client was referred to CD Property Finance and we quickly identified that the situation was retrievable. We introduced the client to a specialist property lender who could see that there was little risk in lending to complete the project as the site was free of charge and the ultimate LTV (Loan to Gross Development Value) was likely to be at a level of well under 50%. The lender very quickly provided the necessary funds and the developer is now bringing the scheme to a successful conclusion.
For more information contact Chris at CD Property Finance.
Email: chris@cdpropertyfinance.com
website: www.cdpropertyfinance.com
Fortunately, the client was referred to CD Property Finance and we quickly identified that the situation was retrievable. We introduced the client to a specialist property lender who could see that there was little risk in lending to complete the project as the site was free of charge and the ultimate LTV (Loan to Gross Development Value) was likely to be at a level of well under 50%. The lender very quickly provided the necessary funds and the developer is now bringing the scheme to a successful conclusion.
For more information contact Chris at CD Property Finance.
Email: chris@cdpropertyfinance.com
website: www.cdpropertyfinance.com
Monday, 20 July 2009
Money Saving Insurance For Property Owners
CD Property Finance is now an Introducer Appointed Representative for Business Money Insurance Services. This means that all our clients, whether property developers, investors or business owners, can now enjoy great insurance rates and top quality service from the experienced and helpful team at BMIS.BMIS has a great general insurance product range and provides cover that is typically 10% to 15% cheaper than others without sacrificing the comfort of using high quality insurance names.
Working with BMIS, we can provide business insurance cover; liability insurance and contractors' all risks insurance; property insurance; commercial motor insurance; plant insurance and personal insurance.
All you need to do to benefit from this service is to either contact Chris Dowdeswell at chris@cdpropertyfinance.com or go online at http://www.bm-is.co.uk/ and quote PROMOTIONAL DISCOUNT CODE: BMIS1017.
Try it and see how much you can save!
Wednesday, 15 July 2009
Property Development Finance for part completed schemes
We have some good news for our beleagured developer clients:
Do you need?
1 - Finance for Part Completed Schemes.
OR
2 - 100% Finance.
OR
3 - Mezzanine Funding
We have been inundated with enquiries in recent weeks from house builders that find dealing with their bank a thoroughly depressing experience. Existing bank clients are still having their loans called in and new ones are met with a quick refusal or, even worse, a long, slow NO. If this is happening to you, we are here to help and there may be a little light at the end of the tunnel.
Best Wishes,
Chris
chris@cdpropertyfinance.com
www.cdpropertyfinance.com
Do you need?
1 - Finance for Part Completed Schemes.
OR
2 - 100% Finance.
OR
3 - Mezzanine Funding
We have been inundated with enquiries in recent weeks from house builders that find dealing with their bank a thoroughly depressing experience. Existing bank clients are still having their loans called in and new ones are met with a quick refusal or, even worse, a long, slow NO. If this is happening to you, we are here to help and there may be a little light at the end of the tunnel.
Best Wishes,
Chris
chris@cdpropertyfinance.com
www.cdpropertyfinance.com
Tuesday, 23 June 2009
100% Development Finance - Alive and Well
Just when we all thought that the days of 100% development finance were over for good, CD Property Finance has located a funder that has the appetite to lend to developers that have got a great scheme but no cash.
There are restrictions, of course. No flats, for instance. Maximum loan £1.25m. Maximum number of houses is five, and these must all be "family" homes and not very high end luxury houses. The lender will fund schemes in England and Wales only.
This is a great opportunity for experienced developers to get a scheme started that would otherwise remain dormant.
CD Property Finance welcomes your enquiries.
All the best
Chris Dowdeswell
CD Property Finance
There are restrictions, of course. No flats, for instance. Maximum loan £1.25m. Maximum number of houses is five, and these must all be "family" homes and not very high end luxury houses. The lender will fund schemes in England and Wales only.
This is a great opportunity for experienced developers to get a scheme started that would otherwise remain dormant.
CD Property Finance welcomes your enquiries.
All the best
Chris Dowdeswell
CD Property Finance
Wednesday, 3 June 2009
VAT - PITFALLS FOR HOUSE BUILDERS
We have linked up with Wilkins Kennedy, Chartered Accountants for this important advice for house builders:
CAN’T SELL A NEW-BUILD HOUSE? TAKE CARE BEFORE YOU RENT IT OUT
If you are a house builder having trouble selling a new home you might, quite logically, be tempted to rent it out until house prices pick up again.
However, under HMRC regulations, you might be letting yourself in for some complex potential VAT problems.
Due to the current slowdown in the residential property market, some house builders are deferring their intended sales of dwellings and temporarily letting instead, and so becoming partly exempt.
As you are probably aware, if a new house is sold freehold or on a long lease (over 21 years in England; 20 years in Scotland) you can reclaim all of the VAT incurred on your building costs.
However, for short leases or lettings, HMRC can insist on a claw-back of some of the VAT incurred on building and development costs.
Put simply, the reason for this is that VAT on freehold sales is rated as zero, so you can recover all the VAT, whereas short lettings of new property are VAT exempt – so you have no right of VAT recovery.
How to check your position
For many house builders the amount of ‘exempt input tax’ related to their temporary lets is small (known as ‘de minimis’) and as a result they can continue to recover all of their input tax; but they must check to avoid VAT mistakes.
If you are in a large building firm you may already be partly exempt and familiar with operating a partial exemption method. However smaller building firms may not be so aware of the intricacies surrounding the whole area.
The ‘de minimis’ is a simple check which is based on the expected time period you will letting your building as a proportion of the economic life of that building, which for VAT purposes is ten years.
How de minimis works
Your exempt input tax is determined by applying the proportion to your total input tax. Provided your exempt input tax does not exceed £625 per month on average (up to £7,500 per year) and is not more than half of your total input tax, then your exempt input tax is ‘de minimis’ and you can recover it in full. What’s more, the ‘de minimis’ test applies to the total input tax incurred - including for example any input tax on general overheads such as bookkeeping costs.
However, if your building or buildings do not qualify for de minimis exemptions, you will almost certainly have to do one or more of the following:
* adjust the VAT previously recovered on your submitted VAT returns
* restrict the VAT to be recovered on your current and future VAT returns
* both adjust your past VAT recovery and restrict your future VAT recovery.
So, for example…
Let’s assume you have recovered £20,000 input tax on a house that you originally expected to sell for £300,000. Because of market conditions, at the end of the tax year you decide to defer the sale by letting for two years and so become partly exempt. A simple check for de minimis is:
£20,000 input tax x 2 year lease divided by a 10 year expected economic life of the building (the standard) = £4,000 exempt input tax
The £4,000 of exempt input tax is de minimis because over the tax year it does not exceed £7,500 or 50 per cent of your total input tax. So there is no need to adjust the VAT previously recovered on your VAT returns. If the input tax was incurred over more than one tax year, the de minimis test should be applied to the input tax incurred in each of the tax years separately.
A word of warning
The starting point for the repayment of VAT when you rent a house is the moment you decide to rent it – not when you sign leases – so you could be liable to VAT even though there is no rental yet coming in.
It’s well worth seeking advice
Naturally this article is only an outline of the VAT situation on letting new houses. If you are not familiar with all the complex issues that lie behind the legislation, simply call Bob Southey on 01483 306318 quoting CD Property Finance.
CAN’T SELL A NEW-BUILD HOUSE? TAKE CARE BEFORE YOU RENT IT OUT
If you are a house builder having trouble selling a new home you might, quite logically, be tempted to rent it out until house prices pick up again.
However, under HMRC regulations, you might be letting yourself in for some complex potential VAT problems.
Due to the current slowdown in the residential property market, some house builders are deferring their intended sales of dwellings and temporarily letting instead, and so becoming partly exempt.
As you are probably aware, if a new house is sold freehold or on a long lease (over 21 years in England; 20 years in Scotland) you can reclaim all of the VAT incurred on your building costs.
However, for short leases or lettings, HMRC can insist on a claw-back of some of the VAT incurred on building and development costs.
Put simply, the reason for this is that VAT on freehold sales is rated as zero, so you can recover all the VAT, whereas short lettings of new property are VAT exempt – so you have no right of VAT recovery.
How to check your position
For many house builders the amount of ‘exempt input tax’ related to their temporary lets is small (known as ‘de minimis’) and as a result they can continue to recover all of their input tax; but they must check to avoid VAT mistakes.
If you are in a large building firm you may already be partly exempt and familiar with operating a partial exemption method. However smaller building firms may not be so aware of the intricacies surrounding the whole area.
The ‘de minimis’ is a simple check which is based on the expected time period you will letting your building as a proportion of the economic life of that building, which for VAT purposes is ten years.
How de minimis works
Your exempt input tax is determined by applying the proportion to your total input tax. Provided your exempt input tax does not exceed £625 per month on average (up to £7,500 per year) and is not more than half of your total input tax, then your exempt input tax is ‘de minimis’ and you can recover it in full. What’s more, the ‘de minimis’ test applies to the total input tax incurred - including for example any input tax on general overheads such as bookkeeping costs.
However, if your building or buildings do not qualify for de minimis exemptions, you will almost certainly have to do one or more of the following:
* adjust the VAT previously recovered on your submitted VAT returns
* restrict the VAT to be recovered on your current and future VAT returns
* both adjust your past VAT recovery and restrict your future VAT recovery.
So, for example…
Let’s assume you have recovered £20,000 input tax on a house that you originally expected to sell for £300,000. Because of market conditions, at the end of the tax year you decide to defer the sale by letting for two years and so become partly exempt. A simple check for de minimis is:
£20,000 input tax x 2 year lease divided by a 10 year expected economic life of the building (the standard) = £4,000 exempt input tax
The £4,000 of exempt input tax is de minimis because over the tax year it does not exceed £7,500 or 50 per cent of your total input tax. So there is no need to adjust the VAT previously recovered on your VAT returns. If the input tax was incurred over more than one tax year, the de minimis test should be applied to the input tax incurred in each of the tax years separately.
A word of warning
The starting point for the repayment of VAT when you rent a house is the moment you decide to rent it – not when you sign leases – so you could be liable to VAT even though there is no rental yet coming in.
It’s well worth seeking advice
Naturally this article is only an outline of the VAT situation on letting new houses. If you are not familiar with all the complex issues that lie behind the legislation, simply call Bob Southey on 01483 306318 quoting CD Property Finance.
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