Expert discusses the opportunities and challenges in the sector
The entire housing market has endured a difficult few years, with many ups and downs, although seemingly more downs.
Despite this, the outlook is improving, particularly across the mainstream market; however, how is the bridging market fairing at present?
What are the opportunities in the bridging market?
Molly Markey (pictured), head of Finanze Capital at Finanze, said investors, both new and experienced, are increasingly exploring innovative financing solutions to navigate high rates.
“A prominent trend is the surge in interest for off-market property acquisitions at discounted prices, coupled with the adoption of OMV (Open Market Value) lending, shifting away from traditional purchase price-based lending,” she said.
The bridging market, Markey said, is thriving as investors seek financial options that empower them to boost property value before selling or securing long-term financing.
This momentum, she added, is expected to persist, with a noticeable shift away from homeowner purchases. Investors, Markey said, are leveraging this shift as an opportunity to negotiate more favourable purchase prices.
Amid this dynamic landscape, Markey said that there are several key factors.
“The utilisation of OMV lending reflects a strategic move, allowing investors to consider the broader market value rather than a singular purchase price,” she said.
Markey added that this approach not only aligns with current economic challenges posed by high rates, but also provides investors with flexibility in structuring their financial arrangements.
“The buoyancy of the bridging market is particularly noteworthy; investors are drawn to lending options that enable them to enhance property value before making strategic moves, whether it is selling or securing more stable, long-term financing,” Markey said.
This proactive approach, she said, aligns with volatile market conditions, allowing investors to capitalise on opportunities for value enhancement.
“As the landscape evolves, a noticeable shift away from homeowner purchases emerges; investors are recalibrating their focus, recognising the advantages presented by off-market property acquisitions and the flexibility afforded by OMV lending,” she said.
This strategic pivot, Markey added, enables them to navigate the challenges posed by high rates and market uncertainties.
What are the challenges in the bridging market?
However, amid the opportunities, Markey said, lie challenges that demand attention, with down valuations presenting a significant hurdle in this landscape.
“Valuers, understandably cautious, err on the side of prudence, resulting in higher post-valuation cancellation rates,” she said.
This cautious approach, while prudent, Markey said, adds a layer of complexity for investors, requiring them to navigate uncertainties in property valuation.
Furthermore, Markey said that buyers are confronted with the necessity for larger deposits to bridge the gap between purchase prices and market values.
This demand for increased capital, she said, poses financial challenges for investors, requiring a careful balancing act to secure favourable terms and mitigate risks.
“Navigating these hurdles becomes integral to the success of investors engaging in off-market acquisitions and OMV lending,” Markey said.
In conclusion, Markey said the current focus on creative financing solutions in the real estate market reflects a strategic response to the challenges posed by high rates. The synergy of off-market property acquisitions, OMV lending, and a vibrant bridging market, she added, underscores investors’ adaptability and resilience.
“While opportunities abound, the landscape is not without its challenges, demanding a nuanced approach to negotiation, valuation, and financial structuring,” Markey said.
As the real estate market continues to evolve, Markey said investors and lenders alike must remain agile and proactive in navigating the intricate dynamics of this shifting terrain.
How do you believe the bridging market is fairing at present? Let us know in the comment section below.
