Friday, August 21, 2009

Wednesday, May 13, 2009

Are International Development & Bridging Loans (Hard Money Loans) Still Available?

As the credit crunch continues it seems that overseas property and development finance has vanished off the face of the earth. Banks and private equity funds are keeping their money under the mattress as property prices are slipping world wide. Even prime property locations in London and New York are not immune from price falls. Price uncertainty has dried up most sources of funding, uncertainty of where property prices will go and uncertainty that even if a project is built end users will be unable to raise funding to complete the purchase. Today there is little sign of cash buyers from the Middle East and certainly not from Russia, as a lot of Russia’s richest are selling off their overseas holiday homes to raise much needed capital.

How can the blockage be removed from the system? Firstly property prices need to stop falling or for the rate of fall to ease, so that that cost projections on new developments can be viewed with some confidence. Second, new mortgages and commercial loans need to be available for the refinance of the completed properties. There is no point in spending money to complete a project that no one can purchase or will want to lease out.

Why are no funders lending? As with every down turn some risk takers are willing to lend money in the belief that the worst is over. They see opportunities where others see doom and gloom. The traditional lending institutions have lost so much money that they will no longer fund viable schemes, even with a low level of risk in good markets with the future potential for growth and profits. In the past they were lending to countries in the emerging markets where the whole economy was growing on the back of property speculation. Now instead of carefully underwriting each project on their own merits they would sooner hoard their cash.

Fortunately there are still some lenders who will lend for overseas bridging and development loans. However, they are choosing the countries they will lend in carefully and each project or bridging loan is carefully scrutinised and underwritten. The key as always for a successful bridging loan application is a viable exit route. For a successful residential or commercial development loan application the key is to have, for residential developments, pre sales in place with deposits taken. For commercial development the key is to have pre-lets in place with quality tenants committed to take on leases on completion of the project.

So as in all recessions there will be winners and losers. The winners will be those that go against the herd mentality and take calculated risks. As the old saying goes “Be brave when all others are afraid and be afraid when all others are brave.”

For more information on International Bridging Hard Money and Development Loans visit Meta Bridging Loans