Simon Betty, head of credit at Wellesley, provides an update on the business’ response to the current market conditions.
The most significant thing I have learnt in my 32 years working within the property industry is that you don’t just roll with the punches: lenders and developers alike will agree that you must plan and prepare for them to ensure you are as well placed as possible to react and take any appropriate measures. Crucially, this is something that underpins every loan we undertake at Wellesley.
Of course, when we committed to loans, no one could have foreseen the specific circumstances we find ourselves in today. However, some of us experienced exceptional market conditions before and lessons we learnt from these times informs our lending strategy and approach to the management of our loans in the current environment. As a responsible lender, we have robust contingency plans in place to ensure as far as possible that our loan book continues to perform and that we are well-prepared to manage unforeseen events such as social distancing measures. You can view the results of an independent stress test conducted on our loans last year here.
So, what have we been doing to protect the loan book?
We have employed additional vigilance within our business support forum. This means that every loan is reviewed weekly by me as well as our head of lending and managing director and issues discussed with the appropriate lending manager. The aim is to ensure that we are on top at all times of factors affecting each development and respond quickly where necessary in taking appropriate steps to resolve any problems. Our borrowers have responded well to this approach and are actively working with us to mitigate the implications of the current market conditions.
As a firm we are also fortunate to have three developments which have recently been completed and which are significantly presold with contracts exchanged. Completions of these sales are still continuing and we do not see this position changing.
There is no denying the impact Coronavirus is having across the development and construction industry, but predictions are that this will only be relatively short term. Whilst Knight Frank has predicted a 3% fall in house prices this year, they are predicted to bounce back by 5% in 2021. With the supply of housing remaining an issue and our initial due diligence and subsequent monitoring of loans, we are confident in the strength of our loan book, our borrows and the industry itself to withstand the short-term disruption.