Paresh Raja, CEO, Market Financial Solutions
It seems nothing can slow down the specialist lending market. Even with all the challenges the property market and economy are facing, demand for bespoke products continues to rise.
Bridging completions grew to a record £1.79bn in Q3 2024, according to the Bridging & Development Lenders Association.
Loan books increased by 7.6% to exceed the £9bn mark for the first time, while applications jumped by 6.7% to hit £10.9bn. Post-Budget, this momentum should hopefully continue too.
The recent farming drama could spark some unique ideas
Broadly, for property investors at least, Labour’s first Budget doesn’t appear to have too many negative repercussions. There are challenges to overcome, of course. But the notion of a grand derailing of the industry now seems overblown.
For a start, many feared the government would be tempted to align capital gains tax (CGT) with income tax rates. In the end, CGT rates were raised by a few percentage points; not nearly enough to ruin landlords or property investors.
Stamp duty was also raised on second-home purchases, and many hoped current reliefs would be extended. Even here, though, a survey from Benham & Reeves found that 73% of homebuyers said they would continue with their plans to purchase. Only 5% stated they had been put off purchasing indefinitely.
A separate survey from Benham & Reeves revealed that 84% of landlords planned to remain within the buy-to-let (BTL) sector over the next 12 months without making a change to their portfolio following the Budget. Some 4% actually plan to increase their portfolio size.
Bespoke loans are there to assist complex investments in holiday lets, agricultural properties and overseas inflows
And why wouldn’t they? No one is claiming our market is in a perfect position right now, but the long-term potential is still there. BTL yields have been on an upward trajectory for 18 months, and UK rents could grow by another 17.6% over the next five years, according to Savills. At the same time, the average house price may rise by 23.4%.
But looking ahead, it’s unlikely that everyone in the property world will be able to weather our temporary choppy waters in trying to benefit from the market’s long-term options. This could create opportunities for investors who can, though.
For instance, the recent stamp duty hike may add pressure to holiday-let owners. This, coupled with reduced furnished holiday-let tax reliefs, may force some exasperated landlords to sell up. Buyers could take advantage of this, especially in certain hotspots such as Devon and Cornwall.
The notion of a grand derailing of the industry now seems overblown
The recent farming drama could also spark some unique ideas among buyers looking for out-of-the box opportunities. As it stands, it’s possible to get tax relief on certain agricultural assets, including farm buildings. But the current reliefs are set to end from 2026, so we may see more agricultural property come to market in the next few years.
Overseas developments may also make the UK property market especially tempting for international investors. Just as UK property investors are dealing with a new Labour government, US investors are having to adjust to a returning Republican administration. Regardless of where one stands politically, the opposition will never be happy seeing their rivals win.
Even with all the challenges the property market and economy are facing, demand for bespoke products continues to rise
Already, we’re seeing wealthy Democrats race to snap up prime properties in London, viewing the UK property market as a safety net. The Cotswolds are also proving tempting for panicked American buyers.
What’s important to remember with all of this is that specialist finance is primed to support the underlying efforts. Bespoke loans are there to assist complex investments in holiday lets, agricultural properties and overseas inflows.
There will always be opportunities in the property market, and some will be more obvious than others. When property investors discover them, the specialist lending market will be there to facilitate action.
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