London Property Finance Conference: P2P development a 'disaster waiting to happen'

Property professionals have aired their concerns about peer-to-peer development finance, with one predicting “significant default” in the next few years.


The UK Property Professionals held its latest conference on Thursday (21st September) at the Building Centre and featured members of the property investment and funding community.

Mark Antscherl, CEO of UKPP and Craigleith Property Group chaired the panel and discussed how at last year’s conference, a commenter claimed that the peer-to-peer market would be an accident waiting to happen.

Mark said: “…There [have] been a couple [of peer-to-peer lenders] that are having problems because they obviously [have] got these funds that have to be deployed… [but] the criteria for lending has been obviously reduced and they just want to get the money out the door and get the returns in.

“The net result of that has been some quite horrible looking bad debts, [and] where they think they’re going to be repaid, the reality is, they’re not going to get repaid.”

Deepak Ohri, associate solicitor at Moore Blatch said: “…In the peer-to-peer property [market], the lenders which actually take the money and are promising the funds without deploying [them], I think they will have a lot of trouble”.

Deepak said that clients of peer-to-peer lenders, such as Octopus, won’t have the same issues or see the risk increase, because they take funds when the loans are ready to be lent out.

Deepak continued: “So I haven’t seen anything else, but I think you’re right, there will be significant default in the next few years.

“…You’ve seen it in the US already where a number of peer-to-peer lenders have defaulted.”

Lynsey Porter, business development director at Go Develop added that she had seen a number of funders withdraw from the development finance market and predicted that there would be some “big wobbles” coming in the development finance sector, possibly associated with the peer-to-peer sector as well as issues with deploying money and risks.

Mark claimed that the model of peer-to-peer lending worked for certain businesses, but not for the property sector.

Lynsey replied: “…I don’t think it works for development finance at all, because development finance is [a] very complex proposition, and when you’re getting people saving under a bank and you need 20 grand one month and then 72 the next and then 102 the next, people don’t understand that.

“And they also don’t understand that if there’s a project overrun by three months, that they have to wait another three months to get the money out, they can’t just withdraw it.

“So I think that [it] is something which is a disaster waiting to happen if people continue to do development finance on a peer-to-peer basis.”

Deepak concluded: “…Overall I think peer-to-peer can be a very good market, but it needs to be regulated a bit more.

“We’re too fast and we’re not regulated quick enough, so if [the] government can catch up, I think they [peer-to-peer lending market] will do very, very well out there.”

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