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Funding Residential Developments

Mark Barstow, Gary Moore and Derek Watkins, the principals behind the Property Development Fund, talk with the editor Richard Bowser about their business model and residential market prospects for 2014

It goes without saying that the recovery in Greater London's residential property market has been quite remarkable, given the scale of the downturn in 2008-9 and a great deal of publicity has been given to the growth in values within 'prime' central London, much of it funded by high-net-worth international buyers. Recent data from RICS shows that the 'ripple effect' has now led to price growth in the majority of UK regions through the autumn of 2013 but many would still argue that is primarily in the south of England where underlying occupier demand is more likely to see healthy returns for residential developers in the next few years.

The wider London economy - measured by GDP per head - is expected by the Centre for Economic and Business Research (Cebr) to grow annually by an average of 4.5-5% through to 2020 and this will put huge pressures on housing provision and related infrastructure. The latest residential forecast from Savills anticipates a 20+% increase in the average price of a London home by 2017 and it would take a massive increase in developable land supply (with planning approval) to reverse the ongoing undersupply trend that has accumulated over the last decade.

As such, the prospects for residential property developers looks pretty positive, provided that suitable sites can be acquired at the right price and that funding for the build phase can be gained. However, the risk-averse approach to development lending adopted by many high street banks in recent years has meant that some developers have been looking towards alternative sources of funding for their projects.

Derek Watkins has been involved in property investment since 2004, founding a property investment and sourcing company and has since built an in-depth knowledge of property sourcing, while promoting and investing both in the UK and in overseas property markets. He has teamed up with Gary Moore who over the past 10 years has focused on new build property development, predominately as a Project Manager and also with Mark Barstow, a commercial finance specialist who has established a property development business and successfully undertaken a number of schemes to construct and market a range of property projects throughout the South East region.

I ask Derek about his thoughts on the prospects for investment in 2014.

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