It has been a hot and heavy week, with all the humidity and sporadic Summer storms sweeping fitfully across much of the UK. Perhaps the weather is a reflection of the Euro 2020 games, which have certainly brought their own share of drama to the scene.
So as we anxiously await the next turn of sporting events, I’m left wondering… will Boris really cough up that extra Bank Holiday? Nonetheless, we are cheering England all the way…..it’s coming home!
Now, let’s take a look at all the headlines that caught our attention this week. I always try to summarise the links to save you having to click through.
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- Lloyds Launches New Venture with Private Rental Debut – Lloyds Banking Group has officially debuted the launch of its brand new residential property rental business, ‘Citra Living’. With plans to acquire more than 800 properties by the end of 2022, Lloyds insists that its objective is “not to ‘hoover up’ properties owner-occupiers would want to buy”. Instead, the banking group will be looking to acquire newly-built, good quality properties in the hopes of softening the blow that private landlords exiting the market has caused. Lloyds is not alone in taking this step. John Lewis also has plans to build at least 7000 new rental properties as it seeks new ways to expand its earning potential and recoup losses in the retail sector. It could be said that there would be less danger of risk in property investment for a big institutional investor, whose property portfolio would only ever account for a small fraction of their earnings. If that is the case, this minimisation of risk could well benefit prospective tenants, desperate for some stability after the damage caused by the recent pandemic. However, this very instability is likely to result in an avalanche of mortgage defaults as the entire economy struggles to recover. So, what could a cynical mind observe from that? Perhaps as more and more borrowers default, these big institutional investors could simply place repossessed homes directly into the rental market and start earning money from them even faster than they could have before. That being said, Lloyds has given £40bn in mortgages to first-time buyers in the past four years alone; a number to be reckoned with which surely shows a high degree of integrity towards its customers.
- Buy-to-Let Mortgage Rates Lower on Average than in 2019 – Nottingham Building Society recently revealed that 61% of landlords surveyed believed that property was a better investment on account of low interest rates for savings. Combine this with the current high demand for rental accommodation and many new investors could soon be seeking to enter the buy-to-let sector. It is certainly true that the average Buy-to-Let two-year fixed rate is lower than it was in July 2019, and that the Buy-to-Let product choice is also continuing to climb. In many ways, it seems that these changes are setting the perfect scene for investors who are interested in the UK property market. With 365 more deals available now than were recorded in July 2019, investors could now find themselves spoilt for choice when searching for the best BTL mortgage out there. Even though there are some private landlords who have decided to liquidate their assets in the wake of the pandemic, it is clear that there is still much to entice prospective landlords to increase their portfolios – or even get those first set of keys to a brand new rental property.
- How to Invest 200K in Property – £200,000 is a great amount to start off with when first entering the property market, and there are many different methods and strategies out there to help you maximise your capital and minimise risk. With this in mind, it is important to have a clear idea of your long and short-term goals, making sure the two align well with one another. This creates a clear path for you to follow when making investment choices. Two of the most lucrative property investment strategies are those of Property Development and Joint Ventures. Property Development / Refurbishment are both great options for building and diversifying your portfolio. Development generally focuses on building on a piece of land in order to raise its value. Refurbishment is comprised of purchasing a home and then making structural and cosmetic changes that increase the property’s value, often then re-selling the property for a higher sum in a move known as ‘flipping’. Joint Ventures, on the other hand, involve partnering up with one or more investors to purchase either a single property or a portfolio of homes together. This can be a great way of saving money, benefiting from another’s expertise and yielding significantly increased returns. When embarking on a Joint Venture, it is always worth clarifying the expectations of all parties to ensure that everyone understands fully what their contributions, responsibilities and profit margins are likely to be. Above all, ensure that all dealings are legally compliant and have a thought-out exit strategy to cope with unforeseen changes.
Will UK Housing Boom Derail Post-Brexit Trade Deals? – Based on historic data, there could be reason to suspect that the incredible explosion of the UK housing market will inadvertently hamper the contribution of trade to economic growth. There may not seem to be a clear connection between the two, but 50 years of Reuters data consistently demonstrates that whenever market rises are used to boost the economy, other important areas such as Manufacturing take a noticeable dive. Part of this is because the housing market is so intrinsically linked to consumer confidence. When confidence is high, we see an overall increase in household expenditure and this naturally pushes the demand for imports. The result is a drag on the economy from net trade. Another important factor is the negative effect a property market boom has on the Manufacturing sector. Rising house prices will inevitably increase the profitability of the construction and real estate sectors. This attracts both labour and capital from higher-productivity industries such as manufacturing. Factories are often forced to increase wages simply to keep their best workers – and these increases are not backed by productivity gains, which makes them less competitive. All these factors point to an economical phenomenon known colloquially as “Dutch Disease,” whereby a booming sector diminishes resources from other sectors to the detriment of the overall economy. Policy-makers are longing for a rebalancing of the market to put an end to this alarming trend. However, with homeowners being so prominent on the voting front, it remains to be seen whether the government will shake off the old patterns and steer the country in a new direction, or if it is destined to repeat the mistakes of the past?
Fire-Safe Cladding Funds: A Catalyst for Change in Construction – Just over five years ago, the tragedy of the Grenfell Tower fire rocked not only London but the entire UK. On that day, Seventy-two people perished in a fire caused initially by a faulty fridge-freezer, but – more importantly – became immeasurably more devastating due to the highly flammable cladding that cloaked the building’s exterior.
The lessons learned from this heartbreaking event will be permanently felt and have lasting effects on policies for both the construction and property industries. The UK government has now funded an initiative that finally pushes property owners to invest in fire-safe cladding on high-rise buildings. This is a much-needed move, but not the only change that needs to take place. Preventing another similar disaster requires putting health and safety as a fundamental priority, with the construction industry taking much more responsibility for the type and origin of materials used for commercial buildings. Residential development companies also have a duty of care to ensure that strict health and safety standards are adhered to, with any sub-standard materials removed from the property with immediate effect. State-of-the-art software such as IconSystem by Elecosoft enables property owners and companies to have instant access to the construction materials used in their buildings. This innovation could prove life-saving by making information and thus accountability much more transparent. This will make adhering to best-practice construction methods a much simpler task going forward. However, all the government funding and software development combined will not be able to rescue this situation or prevent further tragedies. More, it is people’s mindsets that need to change, creating a social consciousness of safety needs – and the ultimate immeasurable value of human life.
That is all we have for you this week. If you have any comments or questions on this week’s news summary then please feel free to send us an email at [email protected] – if not, see you next week.