There are a lot of articles in the press which give a macro overview of the property market. You often see reports suggesting Brexit is dampening the property market and others like the article in Property Wire today which claims residential property sales increased by 0.8% between 2018 and January 2019. But what does it actually feel like on the ground?
As a property finance broker we have access to many different sources and talk directly to the property investors and developers purchasing the properties. Furthermore, we also speak consistently to lenders who offer their thoughts on the liquidity in the market as well as customer trends.
Two years ago, whilst I was Senior Commercial Manager at Shawbrook Bank there was a definite emphasis on property portfolios and accumulating a number of properties which would provide long term growth as well a decent income. It seems to me that times have changed. Things have moved on, most notably, in my opinion, because of the change on tax relief for interest payments. I remember sitting in a meeting room with my peers at the Bank discussing where we saw the property market heading. We knew that portfolio landlords were potentially being forced into changing ownership structures from personal names to limited companies but none of us could have imagined the shift in property strategy I am currently seeing.
I am not sure if other brokers are seeing the same as me but it is becoming increasingly rare that investors are purchasing single BTLs or in fact re-mortgaging BTLs. I know many borrowers have entered into five year fixes which haven’t yet come out of the ‘cycle’ but the market does appear to have moved. Even as I have been writing this article I have had three new enquiries: one is a small development, the other a commercial to resi conversion and the third the purchase of ex-local authority houses being turned into HMOs. Adding value is the key. It appears investors are no longer satisfied with a vanilla BTL. They want more.
The humble BTL still remains a leveraged investment but with property prices plateauing in some locations, the property entrepreneurs are looking for new angles. The two most common niches I have seen are low value houses being converted into HMOs and held for rental, and properties being converted into serviced accommodation. Starting with the HMO conversions, it is evident that there are various options for these clients with competitive loans being made available for experienced refurbers, as well as facilities for those entering into these types of project for the first time.
Obviously, the latter is perceived as more risky and therefore more expensive but there does appear to be a ‘home’ for almost all of these deals. Serviced accommodation is a different story. There are some lenders offering loans for this type of property yet they are not as commonplace as the above mentioned. I would also think it is fair to say that quite a few of the lenders, especially in the challenger bank space don’t really know what their service accommodation position is. In my opinion this market is only going to grow and I feel this investment strategy will only become more popular.
It would be interesting to hear other brokers and finance professionals take on the way investment strategies are altering. There will be diverse opinions and different interpretations of the market but what I am sure of is that as long as property investment remains a leveraged investment there will be investors looking to improve on their property investment strategies.