The single major impediment to SME housebuilders increasing their output is their inability to finance projects. Since the financial crisis, only the most established housebuilders whose credit record remains intact have managed to maintain their banking relationships and, even then, they are severely constrained. For many, this has meant that rates are prohibitive and projects fail before they even start.
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Since Innovative Finance ISAs (IFISA) were introduced in April 2016, inventive companies have found sectors where savers can make a real difference to the economy whilst giving savers above average returns on their investments. The recent Cambridge Centre for Alternative Finance report found that for 41% of people investing in property Peer-to-Peer, a key motivating factor is that their investment will make a difference.
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It is the Government’s stated aim to build 300,000 homes on average each year to solve the ever-increasing housing crisis. What resources will it take to do that? Land with planning permission, willing developers and necessary funding. The Government has already committed to releasing more land, particularly to smaller developers and is consulting with Local Authorities and developers on how to speed up the planning process. As to willing developers; there are plenty of great SME developers across the country with years’ of experience and schemes under their belt, ready and willing to take up the challenge provided that the other two elements are in place. The largest 16 housebuilders built 90,668 in the year to October 2017. Even assuming a dramatic increase in their activity they are unlikely to build more than 150,000 new homes between them. This would leave a further 150,000 homes to be built by the smaller SME developers. Relendex has seen at first hand the demand from SME builders to fund the building of new homes and the refurbish existing properties. We also know from lenders that there is appetite out there for investment loans on income-producing property. Government efforts to boost the housing supply are being choked by a squeeze on funding for small housebuilders, according to a recent Federation of Master Builders (FMB) industry study. It showed that 54% of small and medium-sized developers said accessing finance is a major barrier to building more homes. Almost 10 years after the financial crisis accessing finance is a major barrier for small house builders and is getting worse rather than better. This is despite Govt support through the £3bn Home Building Fund to help those firms with development and infrastructure.
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INVESTING theory suggests that investors should always have some level of asset allocation to the stock market. However, with global markets at or above all-time highs, many risk-averse investors are nervous of adding to their share portfolios. In addition, high valuations lead to low dividend yields, and for investors searching for yield the alternative options are also becoming unattractive as, in the current climate, buy-to-let property, bonds, bank deposits and other yield based investments all have relatively low after tax yields.
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Event report – The launch of From Peer2Here: How new-model finance is changing the game for small businesses, investors and regulators - A CSFI report by Andy Davis
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ALTFI EUROPE SUMMIT: Alternative finance providers outmanoeuvring banks
By Michael Lynn CEO, Relendex Limited
The great and good as well as the smaller players of the alternative finance community were gathered for the AltFi Europe Summit in London last Thursday. The vast space was abuzz with talk of challenger banks, mobile banking, Peer to Peer platforms and FinTech activity. It was in fact the sound of new players eating the High Street banks’ lunch.
The peer-to-peer (P2P) industry has seen tremendous growth in the past year that even big players like Goldman Sachs are launching online platforms and RBS has announced that it is setting up an SME lending platform. The dividing lines between conventional banking and the alternative players were beginning to blur. Not all platforms are looking to become a bank however Zopa, the personal loan (and oldest) P2P platform, has announced its intention to become a bank in the near future.
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