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Residential development lenders 'more willing to take risks'

The stabilising UK property market means residential lenders are more willing to take on risk.This is according to new research from Knight Frank, which surveyed a combination of banks, hedge funds and private equity firms.It found the number of lenders who plan to fund more projects has increased from 75 per cent in the third quarter of 2013, to 78 per cent in the same period this year. Meanwhile, those who would consider a scheme that has a planning risk has risen from 50 per cent to 60 per cent.Sebastian Wallis, head of residential development valuations at Knight Frank, stated: "Some of the mainstream senior bank lenders are now providing mezzanine finance and they weren’t a year ago. It’s by no means in all cases and only for a select group of blue chip developer clients, but it shows that the appetite for risk is growing.""This trend is also underlined by the fact specialist debt funds are increasingly open to providing equity finance," he added.This is certainly good news for the construction sector, as more projects are likely to be launched in 2015 thanks to this increased funding. However, Knight Frank did warn that a return to the lending levels seen before the financial crisis is unlikely to happen any time soon.Its research also revealed lenders are becoming more willing to fund projects outside of London. More than a third (38 per cent) said they would consider backing a development based in the Midlands, while 34 per cent said the same about the north. These figures stood at just 28 per cent and 21 per cent last year respectively.The fact more lenders are willing to fund developments will also please the government, as there are growing calls for the coalition to tackle the UK's housing crisis by building more homes. Last week, the National Housing Federation called on politicians to resolve this problem within a generation. 

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