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Insights

Development Finance Growth: Half-Year Results 2021

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Paragon’s development finance division has recently unveiled interim results for the six months to the end of March 2021. We talk to Managing Director Robert Orr about the trading period and what the future holds.

Robert, can you talk us through the interim results for Paragon’s development finance division?

Of course. It was a very strong period for the division where we saw lending volumes and the net loan book increase. Lending volumes were up 16% year-on-year to £229.5 million, whilst the net loan book grew to £552.3 million at the end of the first half, against £502.3 million recorded in March 2020. 

This was pleasing given the disruption caused by the pandemic and shows the resilience of SME housebuilders. It also demonstrates our desire to support the sector and continue to support customers despite the challenging conditions of last year. We remained active throughout the pandemic and I think our customers recognise that commitment. 

What were the highlights for you? 

Aside from the growth in lending, there were three key initiatives we introduced during the trading period. First, we continued our recruitment drive to bolster the Relationship Director team so we can support more customers in more parts of the country. We now have a team of 39 highly experienced Relationship Directors and Portfolio Managers.  

Second, we introduced loans between £400,000 to £1 million to help those businesses in their infancy. We have seen a good uptake of lending at that level and we’re excited to work with these companies as they grow.  

Third, we increased our maximum loan to 70% of Gross Development Value, which sets us apart from our competitors and means we are able to support a wider range of schemes.

And the challenges? 

Brexit obviously happened during the period and our customers have had to navigate that. The biggest challenges they seem to have faced is in recruitment and importing materials, but the industry is working through these issues and overcoming them. It certainly hasn’t slowed down the desire to develop more homes across the country.  

The level of enquiries coming to us has been increasing and we’re seeing a diverse range of proposals, which is positive for homebuyers. There has been talk that the pandemic will see a shift towards the development of family homes in green spaces, but we’re still seeing plenty of schemes for flats and apartments.  

What’s the outlook for the division?  

I’m positive. It’s long been known that the UK doesn’t build enough homes to meet demand, so there’s plenty of headroom to develop more homes. The pandemic has unlocked a generation of home-movers, whilst Government support schemes and broader mortgage availability are helping first-time buyers.  

From a Paragon Development Finance perspective, we will continue to grow our regional presence. We now have Relationship Directors covering the Midlands, South West, North West and Yorkshire & Humber, so we are well placed to support customers based in those regions.  

What longer-term trends should we look out for?  

I think the revival of town and city centres will be interesting. Our customers are certainly looking at this closely and I expect to see some interesting developments in the coming years as we progress to more mixed spaces containing residential, retail and commercial. This could either be small-scale developments of existing retail space or large-scale regeneration schemes, such as the Watford Riverwell project that we are supporting.  

Elsewhere, I think the Government’s focus on the energy efficiency of housing stock will create opportunities for the new build sector. The Government has already unveiled proposals for the private rented sector and I’m keen to see what it proposes for the broader residential market. I feel homebuyers could have a flight to quality and migrate towards newer homes which are more energy efficient.