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What’s in store for 2020?

by Chris Scott, Lending Director

Let’s start with Brexit and the fact that we are only really just getting started. The threat of a no deal Brexit is still hovering, all be it at a distance, and no one can tell what 2021 Britain looks like. However, it does seem as though the Conservative majority has given the market a nudge in the right direction, with a flurry of properties being brought to market since the turn of the year. Average asking prices have surged 2.3% since the election (Rightmove, 2020) and mortgage approval rates in December were up 19.6% YOY (FT,2020) This is particularly encouraging considering house price growth ground to a 0.7% low in 2019, down from 3% in 2018. All of this points to a well-timed recovery heading into the traditionally busy spring market. It is therefore likely that we are in for an encouraging few months ahead, before another batch of uncertainty due to fall toward the end of the year. Should Boris and his team be able to share some early insights and provide some post Brexit certainty, the good times may well roll on.

Commercially, we have seen and expect to see more activity in the office, hotel and industrial sectors. With interest rates set to remain low, commercial and residential investments will remain attractive proposition for domestic and international investment. Save for retail, we expect to see increased activity in these sectors and the use of bridging finance is well placed to support it, particularly when it comes to acquisition or repositioning. Pluto offers bridging rates from 0.6% per month up to 70% Net LTV.

The development space is one we are particularly excited about coming into the year. All things considered, housing supply is still a major issue for the UK economy and one the government is well aware of. The rental demand/supply gap is also widening due to the impact of tax changes for portfolio landlords, leaving BTR and PRS operators an opportunity to thrive.  With proposed changes to the planning process and continued pressure on housing targets, there is undoubtedly still an opportunity for residential developers. However, due to land trading at a premium, cost of materials on the rise and a shortage of qualified labour, developers will have to ensure efficiency and deliverability is a key consideration. The construction industry in particular will also embark on a period of change. Enhancements in Proptech and the emergence of modern methods of construction (MMC), 3D printing and a data driven approach to delivery will start to revolutionise the space. We have a strong appetite to support experienced borrowers delivering schemes across England. Our products, priced from 3.95% above LIBOR, are market leading and we are currently funding the construction of over 2,000 homes.

In summary, 2020 looks set to be an exciting and largely positive year. Whilst uncertainty will remain in part, what is certain is our appetite to lend across the development and bridging landscape. As a non-bank lender, our processes, decision making and customer service is a key differentiator in our space. This approach, coupled with a market leading product offering and ability to close complex transactions, will underpin the year ahead.

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