November - December 2018
By Miranda Khadr, FIBA Executive Committee member, Founder of BCFC and Yellowstone Finance
Brexit, the word on most people’s lips. It has played a very significant role in our industry, on consumer confidence and property sales. Personally, we have witnessed a slowdown in the volume of sales and purchases in London and the South East. As the year draws to a close, the Bank of England continuously reports that more firms and corporations are getting increasingly anxious over the potential outcomes post March 2019. Therefore, if this nervous attitude extends to investment appetite, we may see a dip in activity in the commercial property sector. Indeed, many investors may choose to adopt a ‘wait and see’ attitude.
Housing market concerns
Potentially this concern over future uncertainty may, as we have seen this year, also affect the UK residential housing market. With the market possibly looking overvalued, we suspect that house prices are set for a sustained period of low growth, if any. Significant falling of house prices may not be on the agenda in the near future, although we believe that this will likely be different in London where there could very well be a price correction – and a potentially haphazard Brexit could exacerbate this.
What about London?
As a business, we have long expected there to be difficulties over house prices in the capital. The local indigenous population seems to find it more and more unaffordable. We have held the belief that although London has strong international interest, with rising taxes on investment in this market, this could weaken over the coming years.
Tax implications
Over the last 12 months we believe that tax changes are starting to take effect and are an underestimated contributor of a slowdown in our housing market. Property purchases are attracting high levels of stamp duty, as well as more onerous tax implications when properties are held in personal names. I believe that people are hesitant to add to existing portfolios with these market conditions in place. A survey recently carried out by Bridging & Commercial showed that in excess of 40% of buy-to-let landlords were looking at selling their portfolios.
Our outlook for the year
From our perspective, we currently see more restructuring and refinancing and believe that this will continue in 2019. As lenders adjust to market uncertainty, many of us will be looking for solutions for clients who are facing a potentially difficult time restructuring in the coming months.
As a broker, we are seeing more and more new entrants into the lending market and we question how sustainable this is. Does this mean that lenders will have to take greater and greater risks moving forward to satisfy their own growth projections? I have heard many suggestions and worries over the peer-to-peer sector and whether a potential failure of one of these lenders will lead to mass consumer withdrawal from these platforms. Let’s hope not, and let’s hope that lenders are prepared for this potential outcome should it indeed occur. I believe our role as intermediaries in helping clients in difficult markets will be more important than ever.