A property finance specialist is advising housing developers that they may need to revise cost forecasts and plan for longer building schedules due to supply chain issues.
MSP Capital says that while market conditions remain buoyant, ongoing and intensifying pressures in the sourcing and delivery of construction materials, plant and labour are likely to increasingly impact the time it takes to complete projects.
As a result, experts in the 41-year-old firm’s lending team say some developers will need to ensure more flexibility in their project finance to accommodate delays and disruption.
Lee Merrifield, Underwriting and Credit Manager, said:
“We’re still seeing lots of positive activity in the selling of finished stock, with the housing market remaining buoyant and achieving strong values. “However, the dual impact of Covid and Brexit has already been leading to prolonged supply chain pressures and project delays.
“Now we have the added prospect of rising inflation, higher energy costs, the Ukraine crisis and potential sanctions on Russia as well.
“This combination of factors will only add to the pressures facing the construction industry.
“The upshot is that developers at risk of disruption on their projects may need to consider fresh cost assessments and potential refinancing so they can avoid or mitigate any exposure to contractual liability.
“For projects already under way, there will obviously be issues when your current finance is nearing the end of its term and your build is behind schedule.
“The original loan term may not be sufficient to finish the building works and also sell on the finished units.
“This is where specialist bridging loans, such as our Development Exit Finance, can help. As a separate bridging loan, it can refinance the original loan to give developers those precious extra few months to get properties from practical completion to sold.”
The Construction Leadership Council warned last year of demand far outstripping the supply of essential on-site materials such as cement, electrical components, paints, sealants, coatings and adhesives, so putting prices up substantially.
At the same time, the Office for National Statistics projected a 7% to 8% rise in the overall costs of construction materials across the building industry.
And amid rising inflation, living costs and the crisis in Ukraine, the Federation of Master Builders has identified new challenges in sourcing further construction-related products such as timber, steel, bricks, roof tiles, aluminium, copper and bitumen.
Founded in 1981, MSP Capital is a principal development and bridging lender, offering solutions for sums up to £20 million.
The company’s Development Exit Finance product is designed to enable the refinancing of properties at practical completion stage to allow more time for sales to take place.
A key benefit is the ability to extend and switch an existing funding term onto a lower-cost facility to extend timelines by up to 18 months. The product starts at 0.5% interest per month and can unlock up to 75% LTV.
For more information on MSP Capital, visit www.mspcapital.co.uk, email info@mspcapital.co.uk or call 01202 743400.