Rebekah Commane, writing for the website Mortgage Strategy in October 2017, has claimed that many development project failures are due to developers who lack experience, expert knowledge, and enough resources to finish projects.
There has been a rise in property developments recently, but some inexperienced developers have not enjoyed great success. Commane believes that some lenders provide easy access to development funds without checking enough, and urges financial companies to carefully scrutinise loan applications from small developers to make sure that their business plans are sound, and that they have enough finance to complete projects.
Commane stresses that if lenders are too willing to provide commercial mortgages without due diligence, this could lead to problems if smaller developers have unrealistic expectations about the viability of a project.
Despite some failures, there are many successful development projects, especially in the residential sector, which accounts for two thirds of all property developments. Many investors are looking outside of London for development opportunities as land and costs can be cheaper. Most major cities have seen an increase in development activity.
Although she has misgivings about some smaller developers, Commane still says that the property development sector is robust. There are many overseas investors starting building projects that are attracted by the weaker pound, which makes building development cheaper for them.
A good commercial mortgage broker will have development experts who can advise those in the sector on finance options. It is also advisable to seek professional financial advice before committing to a development project.