Long term growth main factor behind the move
November 17, 2015: Almost half (44%) of retail investors want to enhance their exposure to the UK property market by other means than owning their home, according to a new study by peer to peer lending platform, Crowdstacker.
The biggest factors driving investor demand are the long term growth of the UK property market (62%), followed by strong levels of rental income (59%) and forecasts suggesting that prices will continue to rise (50%).
Despite strong levels of appetite for property as an asset class, the research highlights the main reasons deterring investors from buying directly into bricks and mortar: over a third (36%) of investors are concerned about the risks involved in managing properties; 30% are put off by the transaction costs and the risk that prices may fall; 28% wouldn’t have time to manage a property and one in four (25%) can’t afford a deposit or a second mortgage.
The study reveals that almost three-quarters (73%) of investors would be interested in putting their capital to work through a new low risk product that offers a return of over 5% a year by making property loans to developers, landlords and property professionals.
The research showed that investor appetite for this opportunity was stronger than for buying shares in companies related to the property market and investing in property funds.
In response, Crowdstacker is providing investors with the opportunity to lend to Amicus Finance Plc (“Amicus”) and is offering 5.43% annual interest over a term of just 18 months. The borrower, Amicus, will use the funds to finance short term property lending to commercial and private borrowers.
According to Amicus, demand for short term property lending is booming in line with the housing market. It has grown from around £1.4billion in 2013 to an estimated £3billion annually today. Many traditional banks have withdrawn from the short term lending sector to focus on standardised long term loans, enabling specialist alternative firms such as Amicus, to rapidly grow their market share by offering high quality borrowers a faster and more efficient service.
Amicus CEO John Jenkins said: “Many investors would like to increase their exposure to the UK property market above owning their own home, but many are put off by the idea of buying a second one or can’t afford to do so. Investors often have a limited appetite for alternatives such as property funds or shares.”
Karteek Patel, CEO of Crowdstacker, said: “Effectively this is an opportunity to ‘lend to a lender’ which is not only one of the market leaders in its field, but which also operates in the buoyant property sector.
“Investors are provided with an exciting opportunity to receive a market beating return by sharing in its success. Its short-term mortgages are secured on UK property at an historic average ‘Loan to Value’ (LTV) of 60% and Amicus ensures that it has personal guarantees from directors. We believe it has an extremely low default rate and therefore can offer investors a high degree of security.”
Amicus’s property loan portfolio is currently made up of 90% residential properties and 10% commercial properties, with 70% located in London or the South East. Its loans are repaid, on average, in 8.5 months and it typically lends between £50,000 and £5 million. It won Bridging Lender of the Year at the Bridging and Commercial Awards, and has lent more than £500million in 800 loans over the past six years.