Property has long been one the UK’s most popular investment assets. And we should know. For the past 14 years MFS has been providing bridging loans to clients building real estate portfolios.
The appeal of property is two-fold. Firstly, house prices have risen at an impressive rate for many decades. As an asset, it offers long-term capital growth for the owner. Additionally, rental yields ensure regular income, as the owner waits for the asset’s value to increase.
Importantly, COVID-19 has not stemmed investor interest. The pandemic has actually accelerated demand for property. From single homeowners considering a larger portfolio, through to buy-to-let landlords who own many properties, there is a clear appetite for new deals.
There are a number of factors behind this current demand for property investment. The first is real estate’s position as a safe haven asset.
Simply put, in times of uncertainty and sharp movements in financial markets, investors tend to gravitate towards asset classes that are stable and predictable. People want the assurance of an investment that will at very least hold its value, but should also rise in worth in the future.
A quick glance at industry data shows that property meets this criteria. In 1960, the average UK house price was £2,300. By 1990 it had reached £59,500. In 2020, the figure stands at £220,100.
Of course, there were downward dips within this sharp upward journey. Recessions and global economic downturns have impacted house prices over recent years; but only in the short-term. The long-term trend has seen property prices grow and grow as the years have passed.
Stamp duty holiday
Coupled with the desire for a safe haven asset, investor interest has also been boosted by the stamp duty holiday. In July, Chancellor Rishi Sunak removed stamp duty on the first £500,000 of all property sales in England and Northern Ireland.
The so-called tax holiday is in place until the end of March 2021. It could result in buyers saving up to £15,000 in stamp duty. Although investors purchasing a second home will still pay the additional surcharge.
Nevertheless, since its introduction two months ago, property buyers have been eager to take advantage of the initiative. According to property portal Rightmove, August saw the highest number of agreed house sales on its platform in a single month since it started tracking the data over a decade ago.
The race is clearly on for deals to be completed before the stamp duty holiday ends.
Finding the right lender
To take advantage of the stamp duty holiday, most property investors will need a reliable lender. Without one, transactions can slow down or fall through, with the buyer left waiting for a loan to be issued.
It is a common story. Here at MFS, we are often contacted by property investors and their brokers who need fast finance due to delays from another lender.
There are a couple of common reasons for finance delays. In the mortgage space, applications can take weeks to be processed. And as many banks are currently acting in a very risk-averse manner, the number of available products has declined.
In the bridging sector, a regular failing among lenders is the inability to access funds. They might be able to handle applications quickly, but they must then wait to receive the capital before they can issue the bridging loan to a client.
MFS overcomes both issues. The application process is quick and simple. We are also flexible – we assess each property buyer’s individual circumstances and tailor our loans to suit them. We have a team of experienced underwriters able to do this within hours.
Further, we have in-house funding lines. Put another way, we have capital ready to loan out to clients. In fact, MFS has a dedicated £60 million COVID-19 recovery fund. It is ready for applications.
We issue loans within days of receiving an enquiry. And as investor demand for property rises, this speed of finance could be key for any buyer looking to complete deals in the competitive market.
Are you looking to invest in UK property in the months to come?
If so, get in touch with a member of the MFS team to find out how we can help: email firstname.lastname@example.org or call +44(0)20 7060 1234.