Where We Are Now. As we move into Spring, easyMoney presents your jargon-free guide to the state of the property and construction market in 2021.
(Capital at risk - Past performance does not guarantee future results)
Better Times Ahead
The days are getting longer, and at last, the warming rays of the sun are lifting our spirits. Everywhere has a lighter, brighter feel. At the time of writing, gradual restrictions to lockdown are giving us all a degree of well-earned freedom.
And not a moment too soon. There’s no doubt that the shadow thrown over our personal and professional lives, and over the economy have been dark indeed.
Not to mention the severe impact on our economy and of course, the effect on the property sector throughout the UK. Generally considered a barometer of the state of our union, the sight of cranes and building sites in our towns and cities tend to indicate rude health for the housing and construction industry.
On a practical level, the en-masse shut down of the construction and property sector last year delivered unprecedented problems. For example, not only were there supply chain issues, and a halt to planning and inspection timetables, properties were harder to visit, which made price setting harder.
To paraphrase Mark Twain, reports of the death of this area of business have been greatly exaggerated – see below for more details. Considering our focus and expertise within the property sector, now could be the right time to talk to easyMoney. If you’re considering an Innovative Finance ISA, get in touch with us to find out more.
In the meantime, let’s wind back the time machine a little.
March 2020. Enter…the Coronavirus Recovery Loan Scheme
The government stepped in with some instant, and it must be said, robust measures to rescue businesses in general.
The Coronavirus Business Interruption Loan Scheme (CBILS), launched on the day of lockdown – March 23rd, 2020, offered a much-needed lifeline to SMEs in the UK who were losing, or rather haemorrhaging money due to Covid-19. In a nutshell, the scheme issued loans of up to £5 million to companies with a turnover of less than £45 million. Plus, the government also paid the interest on these loans for up to 12 months.
A life-changing lifesaver for many.
However, CBILS was replaced with RLS on 31st March this year. Those two missing letters don’t necessarily spell good news for the property sector.
Let us explain.
The Recovery Loan Scheme is different. Firstly, it offers loans to companies regardless of their size or turnover. Plus, business owners can apply for loans of up to £10 million from 6th April until the end of 2021.
Sounds good. But, there’s some devil in the detail. The RLS loans will carry eye-watering interest rates of up to 15%. In effect, this means that the government is now only guaranteeing 80% of the loan amounts. The result? There’s greater caution in lending.
Likewise, we can predict beady-eyed scrutiny on applicants and their ability to repay the loans.
What Could This Mean for the Property Sector?
Some SME developers in the housing sector have expressed concerns that the introduction of these new loans could raise the bar a little too high for them; that is, they may not qualify; without funds, property investors and developers can’t, well, invest and develop.
The 2021 Budget
The Chancellor’s announced an extension to the stamp duty holiday. Due to end at the end of March, it’s been extended in phases, returning to its usual level of £125,000 from 1st October. The result? Some remarkably busy conveyancers.
Plus – a rather loud “boom” in the housing market.
Research published by Zoopla on March 23rd reveals that buyer demand increased by a mind-boggling 24%. In fact, demand was 80% higher compared to the same period over the last 4 years. The knock-on effect was perhaps obvious: a rise in property prices. Quite a big rise, in fact. When something’s popular and when it’s scarce (as property is right now), it gets more expensive.
And lack of supply in the housing market is pushing up prices.
UK house prices have seen an increase of up to 4.1%. Plus, the costs of larger homes have gone up by nearly 5% (4.9%, in fact), and flats by nearly 2% (Zoopla).
We’re all WFH. Working from home, that is. A permanent trend? Hard to say, but saving money, time and stress by avoiding a daily commute or a long drive makes sense for both employers and staff. So, that extra room or dedicated office space has been another factor in the popularity of desirable properties in well-liked residential areas.
It’s no exaggeration to say that by these criteria, the Spring of 2021 appears to be the strongest and healthiest the housing market has been in decades. And let’s not forget the re-introduction of the 5% deposit on mortgages, making life so much easier for first-time buyers.
Whilst the bubble could burst, leaving people with a heavier financial burden than they deserve, all looks set fair for the time being.
But – watch this space.
And the Construction Sector?
Further good news for 2021 – we think.
According to HIS Markit’s latest UK Construction PMI data (Purchasing Managers’ Index), there’s been an increase in economic activity during March (61.7 up from 53.3 in February), due in no small part to our improving situation – and, of course, the jack-in-the-box pent up demand, suddenly set free. Or, freer.
Likewise, according to EY Club, a leading consultancy firm, housebuilding was the strongest growing sector in March this year, thus auguring well for the economy.
This, together with a boost in hiring levels across the construction sector, a rise in household savings (obviously there wasn’t a great deal to spend our money on), plus a lower-than-expected rise in unemployment paints a rosy picture for the coming year. Or rather, a cautiously optimistic pale pink one.
A Change to Permitted Development Rights?
Don’t forget to have another read of our blog from 31st March:
It sets out the details of the government’s plans to allow for a change in permitted development rights. In simple terms, this means that commercial properties could be converted for residential use. As mentioned, in our view the construction and property sector reflects our economy as a whole. So, a “build, build, build” philosophy could tackle last year’s decline head on.
In summary, despite a tough year, these exciting new indications are just what easyMoney was hoping to hear. Why? Because although there are never any guarantees, we think that a robust property sector could mean greater opportunities for you. To repeat – it’s just our opinion, of course, but we’re looking forward to the rest of this year, and beyond.
At easyMoney, we’re more motivated than ever to offer you a different innovative type of peer-to-peer lending. Attractive, alternative investment options to enable YOU to become a non-institutional investor for the 21st century.
e-Money Capital Ltd trading as easyMoney is authorised and regulated by the FCA (FRN 231680). Instant access to your money can’t be guaranteed. The property industry is subject to market conditions and therefore your capital is at risk. Peer-to-Peer Investments are not cash savings accounts so they are not covered by the Financial Services Compensation Scheme (FSCS). Past performance does not guarantee future results. Tax treatment is dependent on individual circumstances and subject to change.