A recent article described how ferocious housing demand is set to spill over into 2021. Indeed, according to the latest nationwide housing market data, the average UK house price rose by 6.5% year-on-year in November, the highest since January 2015 and one of the strongest growth rates seen over the past decade.
This follows a sharp house price rally since the end of June: a 5.8% year on year increase in October, 5% rise in September and 3.7% growth in August. In our opinion, several factors have contributed to the recent strength of the UK’s property market, chiefly the stamp duty holiday announced in July and which is now expected to be extended beyond its initial deadline of March 2021, pent-up demand coming through from decisions taken to move before lockdown and the newly reassessed housing needs of buyers.
However, with securing finance for property projects consistently listed as one of the greatest challenges, especially for SME property developers and small construction companies, will funding be able to keep up with the current ferocious housing demand in 2021? Or will it in contrast end up quashing demand from frustrated property developers and investors?
We strongly believe the answer is that funding will be able to keep up with demand as long as traditional lenders are willing and ready to work closely with alternative finance providers. Of course, one perfect way to do this is under the HMRC’s Bank Referral Scheme (BRS). Launched in 2016 with the aim of promoting increased collaboration between traditional banks and alternative finance providers, the BRS was designed to help businesses who have been unsuccessful with the major banks find finance through alternative finance providers.
Although the BRS has so far achieved mixed results, we expect to see closer collaboration between traditional lenders and alternative lenders under the BRS into 2021. One reason is that the Covid19 pandemic provided an opportunity for alternative lenders to show their worth as they kept lending even at the height of the lockdown, thus proving themselves as a trusted partner to traditional lending institutions. So, given the success of alternative lenders in channelling funding to small businesses and SMEs this year, we believe that the collaboration between them and traditional lenders is likely to strengthen in 2021.
As a result, we expect the alternative lending market to continue to grow strongly in 2021. This is also welcome news for the UK Government and its promise to build 300,000 new houses every year. As has been argued in the past, Mr Johnson and his government’s promise to ‘put its arms around people at a time of crisis’ may find a solution to the current housing crisis by looking at the alternative finance space. At a time when large-scale public borrowing will see an unprecedented deterioration in public finances, there will be an increased pressure for the Government to consider new and innovative sources of funding, especially peer-to-peer property lending, to tackle the housing shortage.
We believe alternative lenders must be part of the solution to help deliver Mr Johnson’s vision, build the homes the country needs and support the strength of the UK’s housing market witnessed in recent months. Indeed, they hold the key to the success of Mr Johnson’s ambitious proposal.
