At the time of writing, this week's first in two significant news announcements had just landed. At 6.7%, inflation data now shows that prices in the UK haven't continued to rise as quickly as previously feared, which may trigger a pause or at least a consideration in the Bank of England rate decisions; if you are reading this, by now, you should know the direction of travel. The ONS announcement blindsided a lot of the economic establishment, which had already modelled and factored in a 7% and beyond rate of rise, creating a betting situation in the Swaps market where the bookie's analogy of a "consensus pick" could be used, bet against the mass consensus on the logic that what people don't expect to happen, usually happens. Gilt yields and Sterling both fell on the breaking news as expected. In what could be the first signs of 'non-locomotive' light at the end of the tunnel for home builders, the big three developers share prices lurched upwards between 4% - 5% in the early FTSE 100 price action, signalling market speculators may be preparing to be long housing once again.
Stock pick tipster page Questor in the Telegraph eloquently put that in their view, "falling house prices present a buying opportunity for investors who can look beyond short-term hype. As house prices never rise uninterrupted ad infinitum, they are unlikely to decline perennially." This, in essence, is what we have been stating in our commentary since Q1: people are sitting on the sidelines searching for the bottom and waiting for a catalyst event. Could a flattening of the tightening cycle be the beginning of that chain of events? The speed of the news cycles these days means that we find out soon enough.
Even though core inflation and, more importantly, in a cost of living crisis, food inflation is slowing, refocusing on our market, rental prices have hit a record new high; according to the ONS, rents in London are up 5.9% year on year, the fastest rise since 2006 when the data began to be tracked, these costs being driven up by the entrenched supply and demand imbalance, and this is the critical metric of concern when looking at the value of the housing market, as it underpins the investment value proposition, rents need to be affordable.
So, how do we solve this problem?
Build.
Regardless of what happens in the markets or what has probably happened at the MPC meeting, now is the time to look to the future, and a big part of the future will be the government's response to stimulating and growing the housing market. On the day of compiling this blog, we also saw the release of Homes England's New Housing Information Hub, a resource we are particularly interested in being named in the financing and homebuilding section. The hub provides developers with resources on economic appraisals, financial viability, cost estimation, funding, and more. It's a pool of data and information that allows SME developers access to an entire library of knowledge whilst simultaneously bringing together all the component sectors of housing delivery, local authorities, planning authorities and funders, and we believe it will serve the SME development sector well in negotiating the myriad of different considerations when structuring a successful scheme.
We consider ourselves a solution-orientated business, so a big part of our origination team days are spent tackling issues and problems our borrower clients come up against when trying to structure and execute their vision as they see fit. Hence, tools that can provide an educational resource to our clients are a fantastic proposition. In previous blogs, we have flippantly referred to the fractured nature of the system; too many departments and sectors working together create complicated and troublesome end-user experiences. Ultimately, we need to make it easier for people to build houses, and it starts with reducing barriers to entry by making it easier to get the correct information on day one.
At Invest & Fund, as always, we continue to service the residential property developer market, with clients tackling these issues and benefiting directly from these resources. We offer enhanced development facilities from 5.30% plus the cost of borrowing. So, if you currently represent clients with these requirements, let's talk soon.
Our Development Finance clients can benefit from facilities up to 70% LTGDV (Up to 85% LTC) from 5.30% plus the cost of borrowing.
For a full criteria breakdown, please email us at borrowing@investandfund.com or call us on 01424 717564.