Property platforms to benefit from new market certainty
Property-backed peer-to-peer platforms will benefit from the certainty that has returned to the housing market in the aftermath of the December General Election result, new figures and industry comments have suggested.
According to the latest data from Rightmove, asking prices have risen by 2.9 per cent year-on-year, driven by the increase in demand after the election.
Read more: Enquiries soar as property development gets post-election boost
“Any market dislikes uncertainty,” Mike Bristow, co-founder and chief executive, CrowdProperty, said.
“A catch-up from softer comparables in the second half of 2019, reflective of pent up demand, is somewhat inevitable but less uncertainty in the market will lead to a stronger platform for modest growth in 2020 and a more confident environment for developers, leading to more construction starts, which is critical to not further exaggerating housing under supply issues.
“The likelihood, and then the reality of the December election, unsurprisingly suppressed the second half of 2019 in markets throughout real estate – from built sales prices through to construction starts.
“Working with SME developers, a critical segment for housing supply as they build out more plentiful smaller parcels of land, CrowdProperty saw a slower rate of growth of applications through the second half of 2019 and extending timescales of closing property project purchases.
“We saw a significant shift in urgency to close those purchases and a significant uplift in application growth rate for development finance following the election result, mirroring the increased confidence in the sales market shown in the latest Rightmove data, throughout the country.”
Carl Davies, chief operating officer, The House Crowd, agreed that the data makes encouraging reading.
“House price rises indicate a welcomed increase in demand as confidence picks up in the economy again,” he said. “We are well positioned in the UK as growth in the Northern Powerhouse should outstrip demand elsewhere in the UK.”
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However, according to Hamptons Internationa,l the number of landlords in the private sector has dropped to a seven-year low, falling by about 223,000 in the past two years, driven by tighter regulation and the three per cent stamp duty surcharge.
“The platforms that are focused on private buy-to-let portfolios or private build to rent may not be so happy,” Davies said.
“However, I think the government will need to review this policy as we are starting to see the law of unintended consequences come in to play. With raising house prices and fewer private landlords in the rental market where are the young and the less well-off supposed to live?
“Additionally, as a lender having a rental exit as well as a sale exit strengthens the proposition from an underwriting perspective.”
Homelessness charity Shelter announced today that the government’s First Homes scheme, whereby local homes are offered at a discounted price to local people, would be unaffordable to the majority of people.
The scheme would grant successful applicants 30 per cent off all new build properties in England. But Shelter warned that this would still require a significant deposit, and in almost all parts of England someone on an average salary or lower could not afford to buy one of these new build homes.
According to Shelter’s research, 63 per cent of private tenants have no savings at all for a deposit.
Read more: Property investors expect government to miss housebuilding targets
Andrew Turnbull, managing director, Wellesley Group, said the big issue is the affordability relative to wages.
“In short, the price of property has grown a lot in the past 10 years and wages haven’t kept up with that growth and that’s put pressure on their ability to buy,” Turnbull said. “Help to Buy has been a successful scheme and has helped.
“In essence it allows people to borrow less so their mortgage payments are cheaper and it’s easier to buy a property.
“It’s not a complete solution, people still have an awful lot to repay but it’s a good solution in terms of making it more affordable in the short-term.
“Clearly anything the government does to make housing more affordable is good because ultimately there is not enough housing at an appropriate price for average people in the UK.
“There is no single action that it can do to make housing affordable, but the greater number of schemes run will help to address the issues.”
Despite the housing market being unaffordable to many potential first-time buyers and some private landlords exiting the market, the consensus is certainty in the market not only boosts house price growth, but provides an environment for modest growth this year for property-backed P2P platforms and their investors.