In this week's blog at the time of writing, the International Monetary Fund (IMF) has just announced that the UK economic performance in 2023 will be the worst among the 20 biggest economies, known as the G20, which includes sanctions-hit Russia. With a perfect storm of macro conditions setting up a long war against entrenched inflation, it's easy for economists to become despondent. Still, we must rally ourselves to this being a transient situation that will pass, as all tough times do. As global circumstances change, economic growth and recovery will follow. So, for this blog, we are nailing our colours to the mast and making some firm predictions on trends for the next few years and beyond regarding the macro picture, investor habits and sentiment, and the p2p sectors' role going forward.

Now at any point where a crystal ball is being used to make predictions, it's essential to caveat these predictions with a rather large tablespoon of salt; it's our best-educated guesses, and for each point we make, we will endeavour to back that up as to why we are making these assumptions. Ultimately, most professional-level analysis is a mixture of technical and fundamental analytical storytelling, albeit investment banks rarely reference tablespoons of salt or use quotes from popular literature; both can seem disconcerting to serious investors. Still, bucking that trend and keeping our blog friendly and light, we are concentrating on the fundamentals, essentially the narrative, and how we predict it will unfold. So here goes.


We are confident in our prediction that central bank interest rates will start to come down toward the back end of this year. Some of these promises on a political level are reasonably baked in, with forward indicators such as energy pricing already in view; we know the inflation rate will slow, which we believe will be enough for the tightening cycle to end for now. This is about balance; one narrative from the mortgage sector back at the turn of the year is that during the oil and gas crisis of the late 1970s base rate hit 17%, so we may have to live with higher rates for a long time to come. The problem is, things have changed since then; as we have seen in the news, a lot of sizeable financial institutions are sat on business models that were designed for the post-2008 low-rate world, low yield government bonds on the balance sheet, leveraged real estate on the balance sheet, and to raise rates you're effectively removing the Jenga blocks of confidence from the system. Also, we have a 15 trillion-dollar consumer debt industry to consider. The wealthy want to acquire assets, but they want to avoid managing them; it's easier to own the debt than it is bricks - but the debt only has value if it can be affordably serviced, and that's why a functioning and affordable debt market must be sustained, it can't be if rates are continually raised. Finally, stresses on public services will become intolerable, taking money out of circulation and de-bloating the speculative markets; these strategies have dangerous real-world consequences we can all see.

House prices

We predict a "V-shaped" recovery for house prices, correlating with a rate plateau. This is due to the flow of capital; Bloomberg reported that £900 Billion went to the wealthiest percentile of the population during the pandemic era, and much of that must be sat on the sidelines, still waiting to be deployed. The flow of wealth is a bit like standing on a hosepipe; the water must go somewhere, and it doesn't disappear when squeezed, and we believe that a lot of this will come into the housing market. Income inequality in the UK, as measured by the Gini coefficient, increased by 1.3 percentage points to 35.7% in the post-pandemic era, and this is a narrative that we have touched on previously - we believe this is a better metric for judging house prices, than the availability of affordable retail mortgages. The final piece of evidence here is something we have mentioned in previous blogs; there has been a massive underestimation of the supply shortage; the backlog is estimated to be around 4.3 million and will take decades to rectify, and that reason alone will underpin price in real estate.

The rise of corporate ownership

We believe that one of the most significant trend changes in the housing market in the future will be the rise in corporate ownership. As mentioned above, the wealthy buy assets, the money has to go somewhere, and traditionally the debt has been easier to own than the assets for similar yields. Still, this latest retracement in house prices has seen a feeding frenzy of corporate buying taking place; funds like Blackrock own tens of thousands of homes and billions in assets, and as mortgage debt becomes harder to obtain, we may see a movement of housing assets from the middle classes to corporate ownership over several decades, but the beginnings of this shift are already visible. Again, this is big money, betting on generation rent by sheer acquisition power. This would be a significant change in the dynamics of housing investment, as historically structured products like Real Estate Investment Trusts were a way to aggregate illiquid commercial properties into one investable business; this new way of thinking is on a much bigger scale, rightly or wrongly, it's setting off on a road that leads to entire housing markets becoming structured products.

The gradual rebirth of P2P as the expected investment aggregator for housing development

So where do we see P2P in this strange new world? First, we see p2p evolving into a structured product for investors to get exposure to property development in the same way the significant Wall St funds will expose them to ownership. We believe that the rise of the products mentioned above will embed the P2P model in the public consciousness as the expected way to invest in housing development, and that will bring in significant wealth and significant players into the sector, people who traditionally would have been involved in other forms of debt, seeing the opportunity that the nations massive building requirements hold. P2P platforms will be the custodians of that opportunity, in the way that the funds will be the custodians of real estate investment by being best placed and experienced to pick up the torch.

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