There has been significant growth in Wales in recent years, but there is still a lot that needs to be done, especially in more rural areas.
Development finance has played a key role in this growth and the transformation of Wales’ economic landscape in recent years. Development finance is funding investors can use for construction projects, its application enables the creation of new homes, jobs, commercial spaces, and infrastructure.
With Wales suffering low GDP and productivity in years gone by, it is positive to see property development and regeneration projects emerging, particularly with an increasing number of developers turning their attention to regional areas of the UK and away from the major cities.
What is development finance?
Before looking at how development finance is driving growth across Wales, it is helpful to define development finance. Development finance is a short-term loan that can be used to purchase land for development and/or cover the costs involved.
Generally, you can borrow from £30,000 with no real upper limit, and you can usually get development finance for 12 to 24 months. Unlike standard buy to let mortgages, development finance requires a bespoke financial solution tailored to your project. Funds are released in stages, in line with the evolution of the build, and it is one of the most complex areas of property investment.
So, whilst there is every reason to celebrate and take advantage of its function, there are risks that have to be considered.
As a more complex method of borrowing, it makes sense to speak with a mortgage specialist like commercialtrust.co.uk for personalised advice and to find the best product for your needs. A broker can make sure an application is made to a lender whose criteria fits with you and your project, and of those available to you, offers the most financially competitive solution.
Strategic investment in Wales
In recent years, strategic investment across Wales has led to significant growth. The Development Bank of Wales has been key in this, with the bank making loans and equity investments of £109.1 million in the 2021/22 financial year. These investments support 460 different businesses and have led to the creation or safeguarding of 3,540 jobs across Wales.
What’s more, the Development Bank has applied a great deal of support to energy efficiency and decarbonisation projects via the “Green Business Loan Scheme”, offering £10 million of lending and the “Green Homes Initiative”, offering £33 million of lending and giving developers up to 2% off loan fees where qualifying criteria is met.
Regional development
It is not just the major cities and urban centres that are benefiting from investment. In 2022/23, 44% of the Development Bank’s direct investments were directed towards more rural areas in Mid and West Wales, showing a commitment to balanced regional development. This includes a £250 million investment in the Wildfox Resorts project in the Afan Valley, which will revitalise the rural economy by boosting local tourism and creating around 1,000 jobs.
The future
It has been a positive few years in terms of growth and investment throughout Wales, but there is still more to be done. The £130 million Investment Fund for Wales was launched in 2023 with a significant amount already invested in small businesses, to support the growth of the Welsh economy.
Private investors are also turning their attention to development projects throughout Wales.
Development finance can be a useful financial tool to get these projects off the ground and stimulate the local economy and housing market. It has played an instrumental role in the growth of Wales in recent years. Strategic investment throughout the country has led to balanced growth, but there is still a lot more to be done in the years to come.
