How to keep building homes during a pandemic
The property market has re-opened for business, but what does this mean for Wellesley’s property portfolio? Andrew Turnbull, Wellesley’s co-founder and director, explains
The property market is a vital part of the UK economy, but when the coronavirus pandemic hit, construction sites across the UK went quiet. While this has obviously presented a huge challenge for property developers and property-backed lenders, Wellesley was able to act quickly to ensure that its projects could continue as safely and effectively as possible.
“Development sites that are controlled by our borrowers are tightly controlled areas, and this is always the case for health and safety reasons,” explains Andrew Turnbull, co-founder and director of Wellesley. “We have asked all of our developers to advise us what health and safety measures they, or their main contractors, have implemented and we have been satisfied with the responses.”
This is a testament to the in-depth due diligence that is performed by the platform long before the first brick is laid. Turnbull adds that Wellesley will only back reputable developers who behave responsibly. “We like to build long-term relationships with our borrowers and aim to work on multiple developments over the years which means that for both parties it is worth taking the time to understand each other’s business and to build up trust,” he says. “For Wellesley this is possible as we are only working with between 20 to 30 borrowers.”
When the extra Covid-19 restrictions were introduced, Wellesley’s borrowers were able to quickly implement the new social distancing rules on their sites. While this meant that construction could continue to some extent, the process of completing these projects and bringing the properties to market has become slower. And despite the recent easing of restrictions, some delays are still expected. “Management of risk is our central priority here,” says Turnbull.
“We will be working very closely with our developers over the coming months to mitigate the risks associated with delayed construction and sales.
“The easing of restrictions will enable our borrowers to open their building sites if they had to close down and undoubtedly will assist them in bringing the timetable of construction back up to speed.”
Of course, the restrictions mean that it has become more difficult for Wellesley to maintain its usual level of on-site supervision. However, the team has continued to perform site visits to some of its developments, and regular video meetings have allowed the platform to keep a virtual eye on things.
Furthermore, Wellesley’s loanbook is well-capitalised, and it is in a good position to be able to work closely with its borrowers to assess what changes need to be made, and to offer flexibility where needed.
“Much of our loan monitoring and risk management measures are done first and foremost to protect Wellesley’s investors,” Turnbull says.
“However, aside from the increased monitoring, Wellesley has a strong loanbook concentrated on medium sized but well capitalised developers producing two to three-bedroom flats and houses in the region of £300,000 in value.
“This means in terms of the overall property market the loanbook is well placed. We conducted a stress test on our loanbook in February 2019 and this showed that even in difficult markets such as these, the loans should be resilient.”
The pandemic will be over some day, and when it does, the demand for housing will still be there. The key challenge for finance providers will be to adjust to the changing climate and do all they can to support their borrowers and investors in the short term. This is a challenge that Wellesley is ready to meet head-on.