There have been a lot of buy to let obstacles this year. Hikes in stamp duty, reductions in tax relief, tightening of mortgage lending criteria, and, of course, Brexit. And yet, landlords have pushed back, undeterred.
Investors Undeterred By Buy To Let Obstacles
Industry figures released last week show that, rather than being put off by these buy to let obstacles, landlords swept back into the market with gusto in September. Connells Survey & Valuation have released figures also showing a strong and successful September, with buy-to-let valuations rising 24% on August’s figures. Rightmove, too, have revealed a 30% jump in buy-to-let enquiries since May.
Another surprising statistic: in the nine months of 2016, to end of September, more has been lent to landlords than over the same period in 2015. Buy-to-let valuations over 2016 are 0.4% up on 2015.
New rental listings, according to analysis by Rightmove, in the third quarter, were 6% higher than in 2015. Anticipated drop-offs in investor activity affecting tenant choices proved to be unfounded.
From London to the North West
Even in the heady London property market, there was a year-on-year increase in rental listings of 15% over Q1-3 of 2016. As such, these high stock levels on the market led to a drop in asking rents in Q3, down 0.7% on Q2, staying below £2,000 a month. Of course, up in the North West where things are weathering the Brexit storm best, during the same period, rents went up 2%.
In the run up to the changes in stamp duty in April, there was an inevitable rush to close on property purchases in the first quarter of the year. As such, there was a significant drop-off come April, though this may well be down to many property purchases being hastened through before April’s changes hit.
Since then, things have really bounced back. One feature of the recovery seems to be a trend for investors knocking sellers down on asking prices to take into account those stamp duty charges.
Planning Pays Off
For those investors who have factored in those tax and policy changes to their financial planning, there are still strong returns on the cards in the property market. Especially when compared to the dismal performance of savings, bonds and equities, the long term ongoing shortage of social housing and a dearth of house building, is making property an increasingly attractive investment option.
Alistair Hargreaves, from John Charcol mortgage brokers, says:
“I can’t see Government rescinding the tax changes they’ve announced and I don’t see the Bank of England making it any easier for lenders. But that said, the flipside is that lenders are having to innovate to get business and there are still lots of competitive options available for landlords.”
In addition, Mr. Charcol mentioned that despite tighter lending criteria, there are some innovative buy-to-let mortgage options available. Moreover, he recommended that in most cases landlords should consider longer term fixed rates or lifetime variables which remove some of the uncertainty for their finances.
Hi guys welcome to another edition of our P2P news blog. This week we start our news update by looking at the alternative finance challenges in mainstream lending for the SME market to focusing on the protection that P2P investors need. Missed our very first P2P round-up? If so, click here.
One In Six SME Owners Seeking Finance Say They Have Been Turned Down By A Mainstream Lender
Leading specialist lender Amicus conducted a study recently and found out that one in six (16%) SME owners seeking finance say they have been turned down by a mainstream lender (such as a high street bank).
Nearly a third of SME owners stated in the research that their inability to secure finance terms with a mainstream lender meant they had lost out on a business deal or investment opportunity. Because of this, SMEs have gained an interest in alternative finance – including forms such as property finance, crowdsourcing, invoice finance, asset finance and P2P lending.
Just over half of the SME owners that took part in the research believe that the huge amount of flexibility that alternative finance offers, is more appealing for SMEs to use, the number is up from 45% in 2015.
The respondents’ views on alternative finance included :- greater ability to lend (46%) was second and longer payment terms (34%) was third. Speed (30%), specialist knowledge of their clients’ industries and challenges (29%) and more compelling payment structures (27%) was ranked fourth, fifth and sixth respectively. (Stats taken from Finextra)
Over half of the respondents said they have already used alternative finance or considered using it.
Deloitte recently released quite a brutal report on marketplace lending, predicting that it will not pose a threat to the mass market or to banks or that it will be significant.
Those in the industry were quick to hit back at Deloitte’s reports. For example, Assetz Capital CEO Stuart Lawshared his views on Business Insidersaying that : “When a system fails, like the banking system in 2008, new entrants will emerge to correct the mistakes. We’ve seen a huge growth in the peer-to-peer finance sector because of that failure, and it’s no surprise that questions are being asked over how banks and Peer to Peer will sit together in the future.”
He also went on to say that he sees no reason why banks and peer-to-peer lenders can’t operate side by side as they are not addressing exactly the same markets.Last year his company and RBS announced a partnership whereby if RBS was unable to provide a business with a loan, it would pass the relevant details to Assetz Capital, which will work with the business to develop an appropriate loan package to suit both peer-to-peer investors and the business.
Deloitte’s report also states that P2P is more expensive than banks and whilst that may be true for some platforms, however, the likes of Assetz Capital are very competitive against challenger banks due to having a low cost of funding and are expected to become more and more so with the introduction of the new Innovative Finance ISA (IFISA).
Indian P2P Platforms Look At Blockchain Technology
P2P companies in India (Faircent, Micrograam and i-lend) are looking at exploring blockchain technology in order to increase transparency levels.
India’s economictimes.com reported that these start-ups aim to serve as a “ledger system” to automate and record transactions on their platform. However, they have to wait for approval from the Reserve Bank of India for integrating the technology into their systems.
Micrograam’s founder, Rangan Varadantold Econotimes : “This can be done without the use of cryptocurrency. This could be a transformational tool in doing payment transactions.”
The Reserve Bank of India released a consultation paper that mentioned that P2P platforms in the country cannot directly engage in money transactions between the lender and the borrower, once the credit underwriting process has been conducted.
A fintech report by Nasscom and KPMG stated that there is huge scope in understanding the potential of blockchain technology in managing p2p remittances in the Asian country.
New to blockchain technology? If so, watch the video below.
China’s P2P Lending Faces A Regulatory Shakeup
Staying in Asia, we now look at P2P in China (in our first P2P blog we also looked at Chinese P2P – view here), in a recent video spotted on Yahoo Finance, Lufax CEO Gregg Gibb enlightens CNBC viewers in a brief interview that there are thousands of P2P lenders out there in China and that from day one there has been a few practises that haven’t been right and as a result regulator pressure is coming in as there is a large need for borrowing, investing, and what working out is becoming to be clear.
Gibb stressed that a high level of transparency needs to go up and as soon as you create transparency, regulation becomes more easier. The CNBC news interviewer questioned Lufax’s transparency efforts, he told her that they make it very clear to every investor what they are investing in, who the money is going to and also to make it clear about the contractual relationship. Moreover, he mentions about the importance of using tools – e.g. to show how to rate and measure something. To sum it up, he says that it is all about the transparency aspect in P2P.
Although there isn’t a “one size fits all” approach to P2P, in my opinion China can look at The UK when it comes to P2P, over here, P2P companies have to record all transactions (the above example of Indian companies using blockchain would be good for companies around the world), as well as submitting full loan books and the performance of investment returns.
Andrew Tyrie, who chairs the Treasury Select Committee has stressed for the need for more protection for P2P investors.
Mr Tyrie challenged lenders’ systems of checking creditworthiness and asked how peer-to-peer lenders made sure they were getting accurate information about the risks. (Telegraph, June, 2016).
In a letter which he sent to thee Financial Conduct Authority (FCA), he stated : “Whether, and if so to what extent, investors would benefit from stronger consumer protection now needs careful thought. Poorly informed investors may be left with a false sense of security about the balance of risks versus returns.” (Telegraph, June, 2016)
Since April this year, P2P lenders have been allowed to offer their products inside an ISA.
The issue here is that there are a lot of lenders out there that are yet to be fully regulated by the FCA.
Christine Farnish, who chairs the Peer-to-Peer Finance Association, replied back saying that P2P websites are audited frequently, plus all members are required to publish in full the details of their loan books to ensure that investors are able to hold platforms to account on credit assessment.
As mentioned in the above news item and looking at the previous paragraph, there is a high amount of transparency in the P2P industry in the UK, however, it clearly shows that there needs to have more regulations set in stone, especially from the consumer side. Read more on the topic here.
What Are Your Thoughts?
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