Peer-to-peer (P2P) lenders have funded millions of pounds worth of property loans in Northern Ireland over the past year, amid rising property prices and a housing shortfall.
London-based P2P platforms such as Blend Network, Octopus Choice and Assetz Capital have been steadily increasing their presence in Northern Ireland by offering funding to local housing developers in Belfast, Bangor, Holywood and Donaghadee.
Assetz Capital saw so much interest in the Northern Irish housing sector last year that the firm lent more than £25m to fund local properties within a period of just six months.
In most cases, P2P lenders stepped in after banks rejected funding applications from local businesses.
Housing shortage remains a key challenge in Northern Ireland. According to the Northern Ireland Housing Executive, approximately 11,200 new dwellings are required in Northern Ireland each year. Yet the number of new properties being constructed in the private sector is around 5,000 per annum.
According to the latest figures from the NI Residential Property Price Index, Northern Ireland’s average house prices grew by 5.5% in 2018, far surpassing the UK average of 0.5%.
This has created a unique opportunity for investors who want to earn inflation-beating returns, while supporting growth in the region.
Yann Murciano, chief executive of Blend Network, said: “We see very strong housing demand in Northern Ireland, especially at the lower-end of the pricing bracket.
“Post-2008, funding has been a big issue for small and medium property developers because traditional lenders literally stopped lending overnight and are yet to return.
“Now, P2P lending offers a fresh new opportunity for experienced property developers to access funding and start building again.”
Earlier this year, Blend Network financed the creation of four two-bedroom flats in Bangor, after Barclays refused funding to local property developers Michael Carnduff and Albert McCann.
“It’s OK for the Government to turn around and say build ‘11,200 new homes in Northern Ireland in a year’,” said Carnduff.
“But currently only a fraction of this is being built. We must have the funding to support this, even with the relaxation of planning regulations. If you can’t get the funding to build, why bother?”
However, most of the P2P lenders who are funding Northern Irish housing projects are not actually based in Northern Ireland.
"Northern Ireland represents a huge potential market for P2P lending, yet the vast majority of our lenders are not actually based in Northern Ireland,” added Murciano.
“We want to encourage more local investors to take advantage of the opportunities that P2P lending can offer, in Belfast and beyond."
What is peer-to-peer lending?
Peer-to-peer (P2P) lending is a relatively new form of banking, where FCA-approved platforms link borrowers and lenders from across the UK.
Borrowers can seek funding for personal loans, house building projects or business development, with interest rates dependent on the borrower’s credit history and the loan value.
Meanwhile, lenders can either invest in individual loans or groups of loans, where they can earn interest rates of up to 15%.
Many P2P platforms now offer Innovative Finance ISAs, which mean that investors do not have to pay tax on any P2P earnings.
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