Michael Dean

Avamore reports reactive behaviour across the property market

There has been reactive behaviour across the property market in response to the slowing sales cycle, according to Avamore Capital’s Q3 industry report.

The specialist lender collaborated with brokers and developers across the sector on the report which covers the development finance and the unregulated bridging markets.

The report found that during Q3 the average unregulated bridging LTV was 69%, in line with Avamore’s previous report, while there had been small increases in the average loan term (eight months) and average monthly interest rate (0.68%).

Meanwhile, the average completion time for unregulated bridging finance was 4.5 weeks.

Brokers reported that the slowdown in the sales cycle was particularly noticeable in the South and developers were considering a move to the North.

Those surveyed felt that this reactive change was unlikely to be the best solution as developers experienced in southern regions did not necessarily have the knowledge to effectively build elsewhere in the country.

Brokers also stated that they were seeing developers diversifying their portfolios and opting for low-risk projects which had a greater chance of a swift exit.

On the lender side, it was reported that there was an opportunity to become more creative with exit finance products which would drive funder competition over the coming months.

Despite market uncertainty, developers said that they would continue to build but would take a more cautious approach when considering GDV.

According to the surveyed developers, there remained a housing shortage in the UK and while exits were slower, they would continue to build confidently to service this gap.

Developers were also very aware that the slowing sales cycle would coincide with the impacts of Brexit which would put a strain on material and labour costs, reducing the developer profit margin further.

The Avamore asset management team included a similar trend in the report, commenting that good labour and reasonably priced materials were becoming increasingly difficult to source.

They felt that prices could increase but it was difficult for lenders to provide finance against these goods. 

Instead they believed that lenders could look to extend the duration of the loan terms if developers built beyond original budgets.

To read the full report, visit Avamore’s website.

Pictured above: Michael Dean, principal at Avamore Capital.

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