Paresh Raja

Real estate investment appetite is encouraging, despite Brexit

After an exhausting few weeks, Westminster has entered its Easter recess, giving politicians time to reflect on the current state of Brexit negotiations and consider ways of overcoming the political deadlock that has seemingly gripped the nation.

Like most of my colleagues, one cannot help but feel frustrated by the government’s poor handling of Brexit. The lack of clarity has made it difficult for many businesses to effectively plan for the future.

However, while there are plenty of question marks hanging over Theresa May’s proposed Brexit plans, it is positive to see many sections of the economy still striving forward. This is particularly true when it comes to property — it seems that despite uncertainty surrounding Brexit, market demand for bricks and mortar remains notably strong.

Recent statistics released by UK Finance provide a good example. The trade association found that the number of first-time homebuyers in the UK reached a 12-year high in 2018, with more people successfully getting on to the property ladder. What’s more, foreign investors are also eagerly taking advantage of London’s prime central real estate, accounting for over half of these transactions in H2 2018.

Last year also proved to be another significant year for the bridging market. The Association of Short Term Lenders (ASTL) revealed that more than £4bn worth of bridging loans were written in 2018 — a 15% increase on the volume of loans issued in the 12 months prior.

With stringent regulations employed by high street banks making it difficult for borrowers to quickly access the capital they need to complete on property purchases, the ASTL figures demonstrate that more people are considering bridging finance.

These are indeed encouraging statistics, showing how in times of political and economic uncertainty, buyers are drawn to the potential long-term capital growth on offer through real estate. Importantly, while some predicted that Brexit uncertainty would cause house prices to tumble and property investors to flee the market, appetite for real estate has remained strong. A survey of 500 buy-to-let investors commissioned by Market Financial Solutions (MFS) in March 2019 found that since the EU referendum, 64% of investors have not let Brexit impact their property investment decisions.

At MFS, we’ve enjoyed our own strong start to the year, too. As well as expanding the team, we have revised our bridging loan criteria — we now deliver loans from £100,000, rather than £200,000 — while we have also secured a new funding line with a global investment bank. And despite a degree of hesitancy among both buyers and sellers at present, the demand for bricks-and-mortar investments — and bridging loans to seize them — is evident.

With the Brexit deadline pushed back to 31st October 2019, there’s no denying just how important the next few months will be in shaping the UK’s political and economic future. Yet with market demand for real estate consistently strong, it seems likely investors will continue to rally behind property as an asset class able to deliver safe and secure returns in the long term. As lenders, our task now is ensuring borrowers are able to access the capital needed to complete their real estate purchases.

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