After an election result that defied initial polls and delivered a surprise hung parliament, Britain has found itself in a state of flux, eagerly waiting to see how Theresa May’s expected alliance with the Democratic Unionist Party will transpire. With the total value of Britain’s homes reaching an impressive £8.17tr at the close of 2016, the next government’s approach to the housing market will be particularly significant as it leads the country through Brexit negotiations.
So far, this year’s shock political and economic events have done little to dampen investor demand for UK property. The Office for National Statistics recently reported that the average house price in the UK rose to £220,100 in April – an impressive £12,000 increase on the same month’s figures last year. While investor demand is evidently strong for residential real estate, the industry finds itself at a critical juncture. The onset of Brexit negotiations opens up a series of new opportunities, but with housing demand outweighing supply, the next government must provide the leadership required for the market to prosper.
Moreover, government policy is required that goes beyond the immediate five-year pariliament in order to catalyse market movement while positively contributing to the country’s housing stock. The delivery of a housing white paper by Theresa May earlier in the year had the potential to provide this leadership and support.; however, while recognising some of the key challenges facing the UK property market and committing to the delivery of affordable housing through the construction of new properties, the white paper overlooked the interests of property investors and lacked the delivery of any creative policy initiatives.
With Britain now facing a hung parliament, it is difficult to know exactly whether the principles underlying the white paper will provide the basis for the new government’s policy agenda. Looking at how previous governments have attempted to manage the UK property market, however, there has been a significant lack of consistency. Since 2000, there have been an astounding 14 Housing Ministers. For any other department, this rate of change would send alarm bells ringing, but this has not evoked a sense of urgency. Having recently welcomed Alok Sharma as the UK’s fifteenth Housing Minister, the Government must now demonstrate the longevity and continuity required for the residential real estate market to confidently stride forward.
One way of doing this would be enhancing the role played by alternative finance platforms in supporting the next generation of property investors, offering them new avenues to purchase real estate through part-ownership opportunities and asset-backed lending. Addressing the gap left by mainstream lenders, the alternative finance platforms have played an important role in offering the capital required for investors to pursue their financial strategy. While UK house prices are rising, mortgage approval rates have been heading south – falling in April from 66,043 to 64,645. In order to support investor access to property, alternative finance options provide the speed needed for investors to secure real estate quickly and efficiently without the fear of missing out during the closing stages of a purchase.
By their very nature, alternative finance platforms exhibit the flexibility to actively respond to changing market conditions. At a time when stringent lending measures have hindered the ability of investors to consolidate and expand their real estate portfolio, alternative finance options have continued to offer an effective line of credit that allows people to act on their investment strategies without the risk of being gazumped. Since 2005, peer-to-peer platforms have lent a total of £9.54bn, with property lending accounting for 21 per cent of this.
Over the ensuing years, it is vital that the next Government in whatever form it takes recognises the challenges facing real estate investors and embraces new industry trends such as peer-to-peer platforms and asset-backed lending. Doing so will ensure Britain continues to boast a globally-renowned property market underpinned by robust investor demand and improved access to finance.