Market Update – 1st March 2019

Since the start of the year, we have seen plenty of activity in the development market as finance continues to be an issue in the construction market especially in the under €5m bracket. A recent note from Martin Cooney, Partner and Head of Construction at Byrne Wallace, is positive on peer to peer lending for small to medium-sized projects. Martin also discusses the increasing state-sponsored construction initiatives, alluding to the newly launched HBFI. The HBFI has €750m in funding available for developments of over 10 houses. This is another welcome move for the market but again is aimed at larger established developers.

In our view, the residential development market for projects under €5m, can be divided into 2 separate sectors, which are as follows,

1)  There is a demand from housing bodies / local authorities for social housing developments across the country, this is driven by the Government’s demand to address the housing crisis. This demand is not region specific, however as you would expect there is a definite concentration for the general east coast area from Louth to Waterford and much of Leinster, as this is where the majority of the population is. Some housing bodies will only look at large developments, from an economies of scale perspective, however, the smaller housing bodies and the local authorities are quite prepared to look at developments of 3 to 15 units, which is a specific target for Property Bridges.

2) The largest demand for commercial housing is not surprisingly in the greater Dublin area. Outside of this zone, the viability of large scale housing developments comes into question. A lot of the financing proposals that are coming to us are mainly for smaller developments in the Dublin area. We would hope to be in a position to shortly bring some of these proposals to you, our lenders.

The period January / February is usually a quiet period in residential development, as developers usually spend this time drawing up their targets for the coming year. We would expect (allowing for a benign Brexit) that there will be an increase in activity for the rest of the year.

We are conscious that lenders would like to see more opportunities to invest on the Property Bridges platform. The life cycle of putting in place a residential development facility from an initial proposal to first drawdown can be protracted when compared to other finance proposals. This can be for various reasons unconnected to the finance proposal, such as planning conditions and the availability of contractors. We are building up our pipeline of business and this delay should no longer be an issue for lenders as we have a constant flow of proposals.