The UK’s property bridging market is still strong, although there are some cracks appearing where some high price properties are concerned, and the economy is continuing on an encouraging, upward trend. In light of this, it’s not surprising that in a recent sentiment survey by the ASTL, a staggering 91% of respondents said they feel positive about prospects for the UK economy in the next six months, while the same percentage said their expectations for the bridging sector had improved.
Interestingly, 96% also said expectations for their own firm’s volume in the next six months are positive, suggesting almost unbridled optimism among bridging lenders in regards to their lending activities as well as general market expectations.
Some of this optimism has its basis in fact; data from the ASTL’s quarterly data results revealed the amount of loans written in year ending June 2015 had increased by 32% compared to the previous year. Therefore, it is understandable that improving economic conditions, a more upbeat, profitable outlook for the sector, as well as the confidence that appears to have been engendered by the election results, are fuelling increased positivity, with 75% of members admitting they have felt optimistic since the election.
However, it is important that we don’t let this obscure our judgement. As we have experienced over the past, every boom is followed by less prosperous times so we must remain vigilant to any potential emerging vulnerabilities such as ‘overheating’, by closely monitoring developments in the sector to help prevent a recurrence of the bubble that formed before the crash of 2007-2008.
As the newly knighted Vince Cable, the speaker at our conference on 1 October, put it in his book ‘The Storm’, “To describe the last decade [1998-2008] of UK house price inflation as a ‘bubble’ does not do justice to it. Even in a notoriously volatile market there are few precedents in recorded British history… for the scale of the inflation”.
As this property bubble has never properly corrected, it is therefore prudent to prepare for a rainy day even in the most buoyant of times. Rising property prices cover errors, but lenders should not be considering higher and higher loan-to-value (LTV) loans.
However, I do think that certainly in the short to medium term the market for both long-term mortgages and short-term bridging loans will continue to gain momentum. As long as we remain cautious, an improving economy should support a modest expansion in the property lending sector in 2015 and beyond.
