Advice – GB Bank chief commercial officer Rob Lankey says green shoots of recovery can be seen in the property development and investment markets.
Rob Lankey, chief commercial officer at Teesside-based GB Bank, takes a look at how the bank is helping to build a reviving property market.
Looking back over the past couple of years in the property world, it is tempting to conclude that it has been rather like one long winter of discontent.
The cost-of-living crisis, rapid building materials inflation, a struggling economy and rising interest rates have made life tough.
However, as we look towards the summer months, there are some good reasons why we can look forward to brighter days ahead – in the property sector at least, if not the notoriously fickle British climate.
And at GB Bank, we’re certainly playing our part in this improving picture in a number of ways.
Affordability on the rise
Mortgage rates have fallen from the highs of 2023 and with the Office for Budget Responsibility now forecasting inflation to reach an average of 2.2 per cent by the end of the year, affordability for home owners is on the rise.
This relatively rapid turnaround is starting to have an impact on house prices. While the picture is changeable and challenging to predict, at the start of this year, estate agency Knight Frank went from predicting a four per cent fall in house prices during the course of 2024 to forecasting a three per cent rise in the space of just three months. In March, estate agents reported a third consecutive monthly rise in demand.
Landlords building property portfolios
A recent survey of residential landlords also found that over a third of those with four or more properties were planning to expand their portfolios this year.
This is perhaps unsurprising when average rental costs went up by almost 10 per cent last year, according to Zoopla, with a further five per cent rise predicted in 2024, improving yields and boosting affordability for landlords and buy-to-let investors.
When you consider the fundamentals of the housing market in the UK – an under-supply of properties for the people who want them – it is perhaps unsurprising to see that investment in this sector is on the rise, after a challenging 2023 for the private rented sector (PRS) as a whole.
Estate agent Foxtons reported in January that instructions for buy-to-let properties had risen by 25 per cent compared with the same month in 2023.
Funding – money from GB Bank has funded a whole raft of residential and commercial projects everywhere from Morpeth to Hartlepool, helping to build communities as well as properties.
Demand increasing at GB Bank
At GB Bank, we’ve certainly seen demand from buy-to-let investors and developers for our finance solutions rising, from residential and commercial bridging solutions to buy-to-let and commercial owner-occupier and investment mortgages and we’re anticipating that demand to grow still further as we move into the second half of 2024.
Getting access to crucial funding, delivered promptly by real experts in the property finance field is a key factor in the success of any property development project and that’s exactly what we deliver – and have been doing since securing our full banking licence in 2022.
In that time, we’ve built some solid foundations in this region and elsewhere across the country.
Over the course of 2023, we lent over £6m to experienced SME property developers and investors across the North-East region looking to take advantage of our flexible approach to lending solutions.
This money helped to fund a whole raft of residential and commercial projects everywhere from Morpeth to Hartlepool, helping to build communities as well as properties.
We’re looking forward to continuing this excellent track record across the North-East and the rest of the country during 2024.
Green shoots appearing
In the sector in which we specialise – experienced SME property developers and investors – we’re starting to observe the green shoots of a turnaround as agile operators look to take advantage of the changing situation.
That’s not to say that SMEs are not facing challenges – in a recent survey from Bibby Financial Services, 60 per cent of small and medium-sized companies reported their existing lender had reduced the availability of credit in recent months.
However, the same survey found 61 per cent of SMEs expected an uptick in sales in the next six months.
Financiers forecasting growth
This growing optimism is reflected within the specialist finance field. The National Association of Commercial Finance Brokers (NACFB) – the UK’s largest independent trade body for commercial finance brokers – recently reported that 63 per cent of member brokers and lenders were either ‘somewhat optimistic’ or ‘very optimistic’ about the SME lending market in 2024 with 29 per cent expecting the property sector to be the largest source of growth in 2024.
Brokers and lenders in the bridging finance sector are similarly positive – a recent survey carried out by industry publication Bridging & Commercial found that 67 per cent expected the bridging market to continue to grow this year.
No-one would deny that we continue face challenges, but prospects are starting to look brighter.
While one swallow doesn’t make a summer, the evidence is mounting that the sun is starting to shine once more on the property sector.
GB Bank offers flexible lending solutions for residential and commercial property projects and investments up to £10m.
We welcome conversations around future opportunities, so get in touch with us at gbbank.co.uk to find out more.