Investment bankers believe that small house builders need more financial support in order to help Britain resolve the housing crisis.
Property finance specialist at London-based corporate adviser and financier Nash Fitzwilliams, Adrian Pritchard, says that tax breaks could be extended to help builders: “Smaller builders are finding it difficult to access equity capital to build. They are good at filling in the gaps to optimise existing housing stock.
“Larger house builders are too big to attack the myriad of smaller opportunities available on a national basis.”
He thinks that tax breaks, like Enterprise Investment Schemes and Venture Capital Trusts, should be applied to building, a sector that is now excluded: “This would go some way to alleviating the current shortage of homes.”1
In the last few years, small house builders have used alternative lenders for backing.
Head of Real Estate at peer-to-peer lender Funding Circle, Luke Jooste, says: “We’ve been inundated with demand from successful property developers looking to increase the supply of housing to the UK population.”1
Recently, Funding Circle investors lent £5m to Verto Homes, which is creating 21 eco-friendly homes in Newquay, Cornwall.
Close Brothers’ investment banker Stephen Hodges explains: “The number of small and medium-sized builders has halved since 2007. Many high street lenders pulled back from lending to them in the recession and have been slow to return.
“By contrast, we have tripled our lending to the sector since 2007 and are funding more than 500 UK developments. We continue to see good demand from small house builders and are keen to support them as regional markets recover.
“Large, listed builders have better access to finance – via equity or bonds through the markets – and better access to bank loans at good rates.”1
It is believed that the Treasury is cautious of extending tax breaks to builders, saying that the value of land supports the investment.
A Home Builders Federation spokesperson says: “We would support any scheme that provided finance – whether it is equity or debt that allowed more SMEs [Small and medium-sized enterprises] to build.”1