Avamore report finds dip in development rates

The latest Avamore Capital Market Bulletin has found that interest rates for development finance fell to 0.72% per month in Q4 2018.


The study — which included responses from 11 brokers, three developers and two service providers — expects rates to decrease further due to reduced LTCs and GDVs. 

Average LTCs and LTGDVs for Q4 2018 stood at 82% and 66% respectively.

As a result, Avamore expects to see a growing need for mezzanine and JV equity partners providing higher risk capital in the capital stack.

Despite the drop in interest rates, anecdotal evidence suggests that they may start to rise in Q1/Q2 2019 as a higher risk premium is demanded from those that fund development lenders.

Loan terms for Q4 2018 stood at 20.4 months, which compensates for longer build periods.

Avamore suggests that developers are accounting for a potential slowdown in construction and activity until the impacts of Brexit become clear.

Completion times hit 7.4 weeks, as lenders implement additional protection for themselves amid the increasing uncertainty.

The report also found that average unregulated bridging LTVs for the quarter were at 69%, with loan terms at 12 months.

Finally, monthly average interest rates for unregulated bridging in Q4 2018 were at 0.82%.

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