by Paresh Raja, CEO of MFS
In the last two years, Britain has faced a series of profound political changes. The resignation of David Cameron and subsequent appointment of Theresa May as Prime Minister, followed by the 2017 snap General Election and formation of a minority Government have all occurred against the backdrop of one of the biggest events to happen in the country in the past 50 years; the decision to leave the European Union. Yet despite initial concerns that Brexit would create uncertain market conditions and undermine investor confidence, the property market demonstrated its resilience as a secure asset class in 2017.
According to a Nationwide report, the property market grew at a rate of 2.5% in the 12 months leading to November 2017, with the average house price reaching a remarkable £211,085. Offering investors access to fast finance to quickly act on property opportunities,2017 was also a high-performing year for the bridging industry – the Association of Short Term Lenders (ASTL) saw applications for bridging loans grow by 45.5% in Q3 last year, with loans written increasing by 38.9%.
Investors confident in property
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As we progress through the first month of 2018, property shows no signs of slowing down. Forecast figures from JLL, Savills, and Halifax anticipate rising house prices over the course of the year. Investors are also confident – a report from MFS found that 63% of investors value property as a safe and secure investment when compared to other new and emerging assets such as cryptocurrencies, despite the latter dominating the headlines in recent months.
With rising house prices and an investor community confident in the growth prospects of the market, there is much optimism that 2018 will be another important year for the property industry. This is despite Brexit negotiations and Theresa May’s weakened minority Government. In fact, MFS’ research has revealed that 77% of investors believe Brexit has not changed their long-term investment strategy.
Putting the right policy framework in place
Although investors argue that Brexit has not impacted their long-term strategy, this does not mean that the Government should be complacent in encouraging growth in the property market. The Government’s reforms to stamp duty for first-time homebuyers in the 2017 Autumn Budget was a step in the right direction and the type of policy that investors would like to see more of.
Three quarters (75%) of investors welcomed the Chancellor’s decision to remove stamp duty for first-time buyers, seeing it as a means for instigating greater movement across the property market in terms of both buying and selling opportunities. However, the Government needs to make sure that it introduces new initiatives and continues to reform existing policy so that people are encouraged to include property as part of their investment strategy, particularly when it comes to purchasing and refurbishing old properties.
The Government also needs to follow the example set by the Mayor of London, Sadiq Khan, in creating and abiding to a long-term housing plan that offers a manageable solution to the current housing crisis. The London Plan, now in its consultation stage, encourages the supply of housing in London by reducing density regulation and setting housing targets for each borough in the capital. This is welcomed and looks to stimulate the continued growth of the capital’s real estate sector – similar approaches could be adopted across the rest of the UK to help hold individual regions accountable for the work they are doing to address the demand for property.
Supporting property investment in 2018
In 2017 the UK’s property market demonstrated its resilience; the continued growth of house prices, albeit at a slower rate, should not be understated given the challenging market conditions that have had to be overcome. As 2018 progresses, it is important therefore that the finance options exist for investors keen to target property as an asset class.
Alongside the traditional lending infrastructure – namely, mortgages from high street banks – it is positive to see the continued rise of the bridging sector, as underlined by the aforementioned ASTL figures. The bridging industry is maturing at pace, and 2018 could see more investors considering bridging loans as effective means of enabling them to act on their property investment intentions. Such competition between finance options can only be healthy for any marketplace, ensuring choice for investors with different attitudes and portfolios.
In the coming 12 months, education and awareness must be increased around the choice that now exists for investors, in turn helping the industry to continue to progress through this period of political and economic change.