Brexit & Bridging

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How will the EU referendum affect the bridging finance market?

A question we have often been asked over the last few weeks, is how a vote for Britain to leave the European Union on the 23rd of June will affect the bridging finance market? #brexitandbridging.

According to a survey of bridging finance brokers by United Trust bank, around half of respondents felt that a vote to leave would present no change to their business, with an opposing 31% of brokers believing that in fact a vote to Brexit would present a negative change to the bridging finance market.

As with the referendum campaign itself, there are opposing views on how the bridging finance market will be affected, however until there is more clarity on what lies in store for the UK after the vote, it is impossible to predict what the future holds for UK property values and the property finance sector.

It is worth noting, in order to hedge against any negative outcome from a vote to leave, many large commercial property transactions that are completing this year have a “Brexit Clause” inserted into purchase contracts. This clause will allow prospective purchasers to exit from future property transactions should there be any downside softening of market values in the event the UK decides to leave the EU.

This risk may well have an affect on the larger commercial transactions that are funded by entities outside of the UK, however the fundamentals surrounding the UK residential market, namely lack of supply and an ever increasing demand, will remain, regardless of the outcome of the vote in June.

With this in mind, we believe there will continue to be an element of “wait and see” for more speculative commercial developments, however bridging finance will still provide a valuable funding solution for the continuation of a vibrant residential investment sector, whether it’s a vote for Brexit or Brussels……