Review of Northern Bridging Finance Market Q2 2019

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The UK property market is seeing hotspots across the country coming under increasing valuation pressure, forcing potential buyers to explore new areas for investment. 

During any property cycle high-value single assets, not necessarily in London, will typically appreciate the most quickly and then be the first to come under pressure. Whenever there is any suggestion of a perceived lack of liquidity and overseas investment, this puts values at the top end under pressure.

City centres attract blue-chip global companies and senior employees. They also attract foreign money as investors look to acquire stock in prominent areas, without the time or inclination to scour ‘hotspots’ in the UK, therefore, focus on high profile locations such as London, Manchester, Leeds etc continues.

A high proportion of our clients focus on areas they have a thorough knowledge of and they have typically carried out extensive research around. This inevitably leads them towards value for money purchases where there is good potential for an increase in values post refurb or strong yields if they retain. The impact for BFS, therefore, is negligible, although there will undoubtedly be a weakening of appetite for any buyers out there who realise the market is more ‘top end’ the closer you get to a city centre.

The inevitable knock-on effect of falling property values comes on the BTL lending market where we have seen a number of buy-to-let lenders tighten up on loan repayment ratios and calculations. This is making it more difficult for investors to lend in some circumstances where yields are being diminished by capital values. For BFS we typically start each potential bridge at the end, so we try to create as much certainty as possible that a client can re-finance within their proposed timescales and repay us, to do otherwise would be unprofessional.

In summary, knowledge and thorough research are the two elements that have remained a consistent ingredient for all property investors, both new and old. The ability to source property that is reasonably priced in areas where there is potential for demand, yield and capital growth is a well-trodden path. Get this right and an investor will ride out any storm that the property market can uncover…  get it wrong and they can be backed into a corner quickly as the market hardens.

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