How is coronavirus affecting the property market and loans?

The Covid-19 pandemic has had a significant impact on virtually all aspects of the UK economy, and it’s likely that the effects will be felt for months, or even years, to come.

And this includes the commercial property market.

What does it mean for the commercial property market?

During the initial lockdown back in March, the commercial property market was hit hard, with widespread lockdowns coming into force throughout the country. The vast majority of businesses were asked to shut their doors completely, or encourage their workforce to work from home, leaving many commercial buildings up and down the country, standing empty.

Data collected has already indicated that less than half of tenants paid their rent on time on June Quarter Day, meaning commercial property landlords only collected 38 percent of their rent.

The situation is still very unstable and the threat of a second wave of the virus, with the possibility of further regional lockdowns is very real. With this in mind, we anticipate prices and demand will fluctuate for at least the next few months as the market adjusts to the ongoing economic environment.

How have commercial property prices been affected?

There’s no denying that the retail and commercial property sector have been hit the hardest and this naturally has had an impact on commercial property prices. Experts predict that rent arrears will not only be an ongoing issue but the capital value of many commercial properties could also fall by as much as 20-30 percent.

Essentially, things are still very uncertain. However, for first time buyers in particular, this could mean there are some great deals to be found.

What does this mean for commercial mortgages?

Commercial mortgages have been a hot topic during the pandemic as they have been a great way to purchase property, or refinance a property that’s already owned. Many business owners are contacting commercial mortgage lenders for additional borrowing, for reasons such as:

  • Securing a better interest rate
  • Recouping funds
  • Reducing monthly costs
  • Gaining financial support
  • Taking advantage of the spike in the market

However, it’s important to be aware that, as with in the residential property market, commercial lenders have become far more cautious as the UK heads towards another recession. With this in mind, if you are considering purchasing a commercial property during the pandemic, you can expect lower loan-to-values and more stringent affordability checks.

That said, there are still plenty of lenders out there to choose from.

If you’re looking to take your first steps on the commercial property market, or you’re planning on selling your property and looking to secure finance, we can help you find the best deals around.  Get in touch to discuss your property finance needs.

An Introduction to Commercial Development Finance

Whether you’re looking to take your first steps onto the commercial property ladder, or you want to kick start your next project, you will probably find that you need to source commercial funding.

There are a whole host of commercial development finance solutions available for landlords, property developers and investors. But the lending market can often be overwhelming, even for the most experienced property developers and landlords.

We’ve created a helpful introduction to commercial development finance – we hope that you find it useful.

What is development finance?

Development finance is a type of loan that releases a set amount of funds in stages, in order to cover the cost of the development of a commercial property.

The funds are generally released at set stages of the project and are typically taken out over a period of six to 18 months. So, for example, funds are released in the early stages to secure the property and then at various points throughout the project to allow for construction and refurbishment.

Once the project has been successfully completed, the property can either be sold or a commercial mortgage can be taken out against it.

Whether you’re completing a short-term refurbishment project, major renovation work or a ground up development, there are lots of development finance options available, designed to accommodate your project scope and time frame.

Commercial development checklist

If you’re considering applying for commercial development finance, almost every lender will ask for the following information before they start processing your application:

  • Details about your company
  • Your development track record, including evidence of experience and proven returns
  • Six years’ business accounts and tax returns
  • A thorough breakdown of project costs
  • Detailed development plans
  • Estimated gross development value (GDV)
  • Details of assets and liabilities associated with your company
  • Exit strategy plan

The amount you’ll be able to borrow depends on a number of different factors, including your credit history, how long you need the finance for, and your track record when it comes to managing and delivering successful property development projects.

There is also a range of other development finance options that can be used to tap into the commercial property sector, including commercial mortgages, bridging loans and auction finance.

Choosing a commercial mortgage for your exit strategy

Commercial mortgages are used to purchase a wide range of commercial properties such as offices, warehouses, shops and other commercial buildings. They are commonly taken out following a commercial development project.

Just like a residential mortgage, commercial mortgages allow property developers to purchase a building and spread the cost over a set period of time.

If you’re considering buying a commercial property, it’s important to speak to someone experienced in the sector to ensure you are aware of all the funding options available to you.

 

Get in touch to speak to one of our skilled and experienced team. Here at Stewart Hindley, we are always on hand to answer any of your queries regarding commercial mortgages and commercial development finance.