It seems property developers can put aside any fears that Brexit may sever lines of credit. According to a recent survey by United Trust Bank, more than half (56%) of brokers working in the fields of asset, bridging, mortgage and development finance are positive about the UK’s future following the EU referendum result.
“In our experience demand for new homes remains healthy,” said Noel Meredith, Executive Director and Head of the Development Finance Division at United Trust Bank. Although the initial reaction to the EU referendum result may have been a pause to draw breath and see how the dust settled, the vast majority of people are now getting on with their lives, realising that much of what we do each day will carry on regardless of whether we are part of the EU or not. We believe there are still excellent opportunities for SME developers to feed in more of the required supply of new homes.
Some SME developers, many of which rely on third party funding, may be concerned that all banks will be less inclined to lend in the current environment, withdrawing from the sector as many of the high street banks did at the start of the credit crunch. However, Meredith argues that quality lenders will take a long-term view. “Whilst some lenders may be less active, experienced specialist lenders recognise that the demand for good quality, reasonably priced housing is going to endure for several years, if not decades, to come, and that SME developers have an important role to play in meeting that demand.”
The survey revealed that 31% of brokers are worried about the future of the UK and a further 13% don’t think the referendum will change very much.
When asked how they felt the referendum result will affect their business, nearly half (49%) believed it wouldn’t affect it much at all while 32% predicted the effect on their business would be negative. Just under 1 in 5 (19%) brokers thought the Brexit would be positive for their business.
Brokers were also asked for their views on what might happen to several key economic indicators over the next 12 months following the Brexit decision.
Average UK house prices
62% – Expect Average UK house prices to stay broadly the same
32% – Expect them to decrease
6% – Expect them to increase
49% – Expect the rate of inflation to stay broadly the same
44% – Expect it to increase
7% – Expect it to decrease
Brokers were asked what they expected to happen to the Bank of England Base Rate and as we now know the rate was decreased to 0.25% on the 4th of August. However this move took 43% of brokers by surprise as they expected the rate to stay the same or even increase in the first 12 months following the EU referendum.
56% – Expected the Base Rate to decrease
39% – Expected it to stay at 0.5%
4% – Expected it to Increase
“We know from our previous poll that just over half of brokers (51%) were pro-Brexit and it now appears that more brokers (56%) are feeling positive about a future outside of the EU,” said Harley Kagan, Managing Director of United Trust Bank. “Although there have been some immediate implications; a fall in the value of sterling and a slight upturn in inflation, largely linked to the currency devaluation, much of the worst of what Remain campaigners predicted would happen following a decision to leave the EU has yet to materialise.
“Although we are still at the very early stages of extricating ourselves from the EU, and Article 50 is yet to be triggered, there is a definite sense from the majority of the industry that for most lenders, brokers and borrowers for the time being at least, life goes on.”