"We have seen resilient demand from landlords and property investors, who recognise the fundamentals behind this sector remain excellent."
There has been plenty of discussion in recent months about the difficult spot the property market is in. The increases to interest rates on regular mortgage deals has had an inevitable knock-on effect on demand from potential buyers, and therefore house prices. The latest Halifax house price index for example suggested prices have dropped 4% over the last year.
These headline trends don’t tell the whole story though. We have seen resilient demand from landlords and property investors, who recognise the fundamentals behind this sector remain excellent. The underlying imbalance between supply and demand of property means that when investing in the right areas, if you know what you’re doing, decent margins can be achieved.
This is well illustrated by the level of interest in auction purchases of late. New data from EIG shows there has been a sharp increase in the number of property lots over the last year, up by 50% annually. But there has also been a jump of around 39% in the number of lots being sold.
In other words, while more sellers are turning to auctions in order to shift their properties, greater numbers of buyers have realised they offer a great opportunity to pick up a quality asset at a competitive price. We have certainly seen a stark increase in interest from auction purchasers.
Spotting opportunities
Even outside the auction houses, it has been encouraging to see how positive many investors are around potential purchases. Taking that long-term view means they can see the opportunity these properties offer overall, rather than becoming fixated on any short-term challenges.
Just within the capital for example we have recently taken on cases including a £2.8 million purchase in Chelsea from a repeat borrower, a £350,000 deal to refurbish a property in Chingford and a £450,000 facility for the purchase of a semi-commercial property in Ealing.
These borrowers have different backgrounds, some having been builders who can take on the refurbishment work themselves, or simply landlords with experience in the area so they understand the local market.
What unites them is the desire to improve those properties, to develop them so that they meet the needs of local residents or tenants and secure a profit in the process.
Doing so relies on working with lenders who take a similarly positive approach towards this market, and are equally keen to pursue deals that make sense for all involved.
Moving swiftly
The ability to conclude cases quickly, irrespective of whether landlords are looking to purchase or refinance, has always been important. However, in the current climate it has become ever more vital.
If an investor has spotted a property at auction, or listed on the market generally, then they need to be able to rely on getting funding in place rapidly. Similarly, if they are looking to refinance, perhaps because their existing deal is coming to an end, then doing so before moving onto a reversion rate is crucial.
This has been emphasised by the reception to the Fast Track process at Tuscan in the year since its launch. The process makes greater use of AVMs and desktop valuations, alongside title insurance and search indemnity policies, and has led to tangible improvements in completion and turnaround times.
On auction deals, for example, completion times have dropped from 24 working days to 16, while development exit turnaround times have dropped from 54 days to just 29.
It’s easy to talk about wanting to be more efficient and speed up the way you work, but the success of the Fast Track process has been an excellent demonstration of how understanding this market, and identifying how technology can take on some of the heavy lifting, can deliver enormous time benefits to both brokers and borrowers alike.
Working with lenders you can trust
It is impossible to ignore that this has been a challenging time for the property market, but the truth is that the fundamentals remain incredibly appealing for professional investors. As a result, there remains a healthy level of demand, whether to refinance existing portfolios or to expand them where possible.
Given this, it’s crucial for brokers to work with lenders that genuinely understand this market, and have put in place the processes and products needed to deliver the best possible experience to their clients.
That means lenders with a track record, who can be relied on to deliver the promised funding, and who recognise the importance of moving quickly. Bridging will continue to play an important role for positive, proactive investors.
