Jay Patel, business development director at Wellesley, takes us behind the scenes of one of the platform’s development loans…
THE UK-WIDE SHORTAGE of low-cost housing has been well documented in the press by politicians, housebuilders and frustrated first-time buyers. But in real life, the push to develop lower-cost homes has been led by the alternative lenders who are willing to source and fund the sorts of properties that people will actually want to buy and live in.
Over the past couple of years, Wellesley has shifted its focus on this under-served market by investing in mass-market homes in desirable areas, which will appeal to first-time buyers and downsizers alike. “We’ve spent a lot of time looking around demographically different areas, taking into consideration figures such as the average age of an area and the average growth net migration into an area so we can actually understand who is moving there,” explains Jay Patel, business development director at Wellesley.
“The majority of our loanbook is flats and houses with an average value of below £300,000, and we prefer to look at properties based around the outskirts of provincial cities such as Manchester and Birmingham.” A 213-property development in the Greater Manchester area offers an at-a-glance look at what a typical Wellesley loan can do.
The Elisabeth Gardens project is based in the town of Reddish, near Stockport. 51 new-build houses and 162 new flats are being created in an old mill, in an area that is in need of more lower cost housing.
“This particular project is being managed by a developer that both my head of lending and I have known for some time,” explains Patel. “We were presented with this particular project when around half of the properties had already been sold to both buy-to-let investors and owner-occupiers.” For Patel, the quality of the developer is the first thing that he will look at when considering a new development loan.
Then he takes a look at the scheme itself, the market, the construction process, and the existing demand for this particular type of housing. “We worked through that process,” Patel says. “And we concluded that they are building lower cost housing in an area that really needs lower cost housing. What’s more, the project was presold and de-risked to the point that we were selling to high-end investors and owner occupiers, and not just buy to let.”
At least 170 of these units were scheduled to be handed over before Christmas 2019, along with all furniture packs and white goods installation for the new owners. As a lender, this means a timely return of the capital and interest. But as a platform which is dedicated to promoting low-cost housing options in the UK, it is particularly satisfying to know that dozens of families will spend their first Christmas in a brand-new home.
As for 2020 and beyond, Patel says that Wellesley is set to maintain its focus on lower-cost homes. “There is more than enough demand for us to achieve scale, and more than enough loan facilities developers out there who are building this type of product,” he says. “I’d personally like to start focusing on some of the larger schemes, and to further diversify our loanbook. But in 2020 I see us continuing exactly what we are doing. “It’s working well.”