2020 has been a challenging year for many peer-to-peer lenders, but residential development finance appears to be a bright spot in the lending landscape.
A number of P2P lenders that operate in this space have reported a strong performance despite the lockdown of the property market during the first pandemic, with buoyant pipelines and vast numbers of completed projects.
As the UK continues to face a housing shortage, P2P lenders – with an enviably diverse array of funding sources – can continue to help to finance the small- and medium-sized housebuilders who are playing a pivotal role in boosting supply.
Assetz Capital’s chief executive Stuart Law said on Friday that housebuilding “remains critical to the UK’s future” and is moving up the government’s agenda.
The platform has received £40m from the British Business Bank this year to support small- and medium-sized enterprise (SME) property developers, under the coronavirus business interruption loan scheme.
“After a lot of uncertainty during the first lockdown, the vast majority of developments that we fund have continued apace – and we presently see no major issues arising in this space in the time ahead,” he said in an emailed customer update.
“Our lack of exposure to the struggling central London market and deep knowledge of the regions has been important too. And while we do have a modest number of commercial mortgage borrowers in the retail and hospitality sectors, we are doing all that we can to get them through to the point where they can trade again – while maintaining interest repayments as a minimum wherever possible.”
A number of P2P residential property development lenders have reported strong growth this year.
Back in October, CrowdProperty hit the £100m lending milestone. Chief executive Mike Bristow said at the time that the “predictable” high demand for residential property makes the sector more resilient in a downturn than other types of lending such as unsecured consumer, small business or commercial property finance.
“During the last financial downturn there was an 18 per cent on average fall in the price of residential property driven by total closure of the debt market, followed by 12 years of strong capital growth,” he added.
Prime property development lender CapitalRise has also reported a bumper year despite Brexit uncertainty and the pandemic. It achieved a record month in July in which it originated £10m worth of loans. Then in August the platform processed £4.1m in investments, up 222 per cent year-on-year.
It appears that other types of lenders are recognising the benefits of P2P development finance portfolios.
Earlier this week, it emerged that Shawbrook Bank has acquired RateSetter’s £167m development finance portfolio, which includes residential and mixed-use projects, in a deal that will also see the P2P lending platform’s development finance team move to the challenger bank.
Both Shawbrook and RateSetter heralded the quality of the loan assets and the benefits of the acquisition, which will add more than 100 new active clients to Shawbrook’s existing development finance business.
Meanwhile, the success of FutureBricks’ crowdfunding campaign shows that investors have confidence in P2P development finance as well.
FutureBricks,which lends to small- and medium-sized housebuilders, completed its crowdfunding campaign this week, with more than £470,000 raised from investors – surpassing its target of £320,000.
Having shown such a strong performance during a challenging year, P2P residential property development lenders will be able to further build on their success in 2021.