PropTech update – boosting homebuilding and revamped deposit service

7 May 2021 | Investment

A new PropTech engine has issued more than £600 million worth of Instant Sales Guarantee proposals in the first three months of 2021.

LDS’ online engine, which transforms viability for small and medium-sized enterprise (SME) housebuilders and their lenders, supplied a total of £603,200,000 worth of Sales Guarantee proposals for new housing developments in Q1 2021.

LDS, which launched its engine in January, wants to enable SME housebuilders to construct more homes, which it says is key to help solve Britain’s housing crisis as larger developers are reaching capacity.

Access to finance has been a growing problem for SME housebuilders, with the Federation of Master Builders reporting that 42% of SME housebuilders were involved in sites that stalled for financial reasons in 2019.

In 1988, SME housebuilders were responsible for 40% of new-build homes, compared to around 10% today. This equates to a drop of 75% in the number of homes built by SME housebuilders in just over three decades.

The LDS Sales Guarantee removes exit risk for housebuilders and their lenders by underwriting the financing of sites. It says this catalyst ‘opens up increased access to finance and the ability for increased output’.

LDS can also release 10% of the guarantee value to the housebuilder unsecured and at zero interest.

According to the firm, the cash release can reduce housebuilder cash contributions by an average of 77%, enabling them to bring forward up to four times more new housing from the same cash base.

Mark Hawthorn, chief executive of LDS, comments: “We are pleased, although not surprised, to see interest in Sales Guarantees growing rapidly.”

“The response in the first quarter since the PropTech engine was launched gives me huge confidence we will meet our goal of £4bn in Sales Guarantee proposals for 2021.”

He adds: “The adoption of Sales Guarantees by the market is driven by simple facts – they remove risk, reduce cash requirements, and increase returns. The compelling duo of higher returns and lower risks completely transform the viability of sites for both housebuilders and lenders, allowing much-needed new housing to be brought forward.”

Housebuilders, lenders and brokers can create a free, no-obligation Sales Guarantee proposal in around two minutes using the engine.

Hawthorn continues: “SME housebuilders tend to build on smaller brownfield and infill sites in already-established areas, which hold huge potential for additional homes across the country.”

“By helping them to unlock development finance and boost their output, we are driving the revival of the SME housebuilding market and helping the Government meet its target to build 300,000 new homes each year.”

flatfair revamps deposit alternative service for landlords

Payment technology firm flatfair has refurbished its offering, claiming it gives twice the protection of a traditional deposit scheme.

It says landlords can benefit from 10 weeks of damage protection or five weeks of damage protection and five weeks of rent arrears protection.

flatfair’s No-Deposit solution allows tenants to secure a new home with ‘a small, one-off check-in fee equal to one week’s rent +VAT instead of having to provide a costly cash deposit’.

It insists that with the average monthly rent in England sitting at around £700, and £1,400 in London, its service will save tenants having to find hundreds or thousands of pounds when they move.

All landlords are able to sign up for the revamped product.

Franz Doerr, founder and chief executive officer of flatfair, comments: “The additional levels of protection will provide extra security for landlords and their rental properties when they need it most.”

“While renting through traditional methods means landlords can only secure a deposit capped at just five weeks’ worth of rent, we’re offering an extra five weeks’ worth of protection completely free for landlords and with only a small upfront cost to tenants, releasing them from the main financial burden of renting.”

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This post has originally been featured in Property Investor Today.