If 2020 taught us anything, it’s that unexpected events can occur at any time. And as the start of 2021 (plus a new national lockdown) has shown, things are still liable to change rapidly. With that in mind – rather than predicting – we’re reflecting, identifying some potential trends, and examining the landscape for the UK’s high value property market. And the Articus Finance team is also hard at work considering how we can continue to support our clients as they navigate an increasingly complex investment landscape.
Property market update: the Covid-19 impact
Analysing the impact of Covid-19 on the UK housing market has proved a difficult business; the ongoing stamp duty holiday is potentially skewing the market somewhat. But we certainly haven’t seen the crash many feared.
Throughout 2020, the Land Registry reported that ‘the price of a property in the UK increased by 1.7% month-on-month and 4.7% year-on-year in September’. Meanwhile, Rightmove found that average asking prices had risen 6.3% year on year.
In our direct experience, the market has been surprisingly buoyant. Naturally, the stamp duty holiday has encouraged a great deal of activity – especially for first time buyers, for whom the saving makes a significant difference. The government has also shown a clear commitment to keeping things moving: despite the strict new lockdown, house viewings and visits relating to house sales are still permitted under law.
The prime property market
The world of high-value property – and particularly the London market – has experienced some challenges in the last few years. From tax changes to Brexit uncertainty, many buyers have been hesitant and price growth has been stymied. But despite the huge disruption over the last year of the last year, things have heated up considerably.
A recent report found that, in the six months leading up to November, ‘there was a 78.9% surge in the number of properties changing hands for between £5 million (US$6.7 million) and £10 million, compared to the same period last year.’ Much of the activity has been driven by changing priorities motivated by the pandemic. With so many working from home, ‘Big properties with gardens, home offices and access to outdoor space have since become a must-have for many.’
This has certainly been the experience of the Articus team – over the last year, we’ve helped a number of clients purchase their dream homes in the UK.
In the long term, it’s hard to say if this heightened activity will continue once the full effects of the recession are felt – but ultimately, UK property has proven itself time and time again to be a stable asset class. Those looking for short-term capital growth may be out of luck, but those willing to make longer term investments should still be confident about UK property.
Who we’ve helped
We recently helped an Indian national living in Singapore purchase a £6 million residential property in the UK. This individual was a global high net worth individual with multiple income streams, making it incredibly difficult to source finance – but we were able to arrange a five-year fixed interest-only mortgage with a top private bank.
In the summer, we helped a self-employed UK national purchase a home in London. This client left significant profit within his businesses, and was also seeking to buy with a low deposit. We sourced an interest-only mortgage with a lender that has a high appetite for self-employed clients.
Mortgage market trends in 2020 and beyond
Information about property prices and trends is easy enough to source, but it’s often more difficult to understand broader trends in the mortgage market – particularly at the higher end. One recent report with figures from the Bank of England indicated that mortgage approvals are at a 13-year high. Meanwhile, the finance that Articus arranged throughout 2020 provides an interesting insight into the high net worth sphere.
Over the course of the year – despite the pandemic – we saw buyers and existing owners from across the full spectrum seek out new mortgages, and there was huge appetite at every level. This ranged from first time buyers to global ultra high net worth individuals refinancing property valued in the tens of millions.
Our average loan value for the year stood at £1.325 million – while the average purchase value was £2.2 million. And although there was a dip in activity in the early days of the pandemic, we saw a significant number of very high value cases from the late spring onward.
And even in the first weeks of 2021 – despite a new lockdown – our team continue to be busy, suggesting that HNW investors aren’t slowing down any time soon.
Case Studies
In spring, we secured a private bank mortgage for a hedge fund worker using bonus income. This enabled him to purchase a stunning £3.5 million property in South West London.
Our team sourced a UK mortgage for a US resident ahead of his return to the country. We arranged an interest-only loan for our client – who was earning in US dollars – enabling him to purchase a £1.2 million property.
International appetite for UK mortgages
In terms of client profile, our activity in 2020 shows that – despite ongoing Brexit uncertainty, a pandemic, and the threat of serious recession – global investors from around the world continue to have confidence in the UK property market. Over the last year, we’ve sourced mortgages for clients who reside in 67 countries around the world across almost every continent.
Take a look at our Expat and Foreign National Guide which explores the solutions available for overseas investors: https://www.articusfinance.co.uk/guides/expat-foreign-national
Earlier this year, we arranged a private bank mortgage for a Canadian hoping to buy a property valued at £2.3 million in London. This client did not have the income required to support such a large loan – so, we arranged a mortgage with a guarantor with a private bank, with no AUM required.
We recently helped an American landlord with no experience of UK property purchase his first buy to let investment in London. Despite a variety of complex issues to overcome, we were able to negotiate with a building society which has high levels of experience arranging finance for foreign nationals.
Lender appetite: the availability of finance
As for the availability of finance, there has been much reported in the press about lenders withdrawing from the market. Unlike the last economic crisis, the unique nature of this recession means lenders aren’t experiencing issues around liquidity. Rather, it’s a case of challenges around capacity, the practical limitations of the pandemic, and caution around the future.
This is certainly true in the mainstream: lenders have withdrawn higher LTV products, restricted the sort of properties they will lend against (such as new builds) and generally limit the number of applications taken on a daily basis.
In the high value sphere, however, things are a little different. Private banks and family offices respond to individual circumstances, rather than mass market movements. They are less transactional and work on more of a case-by-case basis, meaning they are far more willing to examine every case on its own basis.
So, rather than offering blanket products and withdrawing them as needed, it’s more typical to negotiate a bespoke deal – and this has continued throughout the pandemic. As such, we have continued to work closely with these lenders to secure the right finance terms for our high net worth clients.
Will practical challenges persist?
Many have experienced huge frustration over the last year due to the practical issues around mortgage finance created by the pandemic. With valuations unable to go ahead for a portion of the year, and lenders working from home (often without the correct systems), the industry was already under strain. So when the stamp duty holiday was announced and sales kicked into overdrive, long wait times inevitably ensued.
Fortunately, our team has managed to overcome many of the challenges faced and continue to deliver a quick service. We’re delighted to have leveraged our exceptional lender relationships over the year to help clients achieve results at speed. And we’re exceptionally proud to say that our team broke some personal records this year – taking one client from enquiry to offer in three working days, and another to completion in just six days.
While the long delays on many fronts have been understandable, given the circumstances, this does demonstrate that fast results still can be achieved – providing you have the right industry relationships. And, fortunately, the new lockdown shouldn’t prove an impediment to market activity.
What next: The view for Articus in 2021
As we consider the year to come, we know that there’s little point spending too much time on predictions – as we’ve already seen, things could change at any moment. Our sense is that the surprising growth we’ve seen over the last year will continue; despite all of the uncertainty, both domestic and international investors continue to see the UK as a solid long-term investment. And with mortgage rates still sitting at historic lows, now could be an ideal time to invest.
As for Articus, we’ll continue to assist our clients around the world with mortgage finance. We’ll keep finding solutions for complex cases, leveraging our extensive network of lenders and our knowledge of the market to full effect. And we’ll always ensure that we’re on hand to help our clients when they need us – no matter what comes next.
