If 2020 was a year nobody could have predicted, 2021 was likewise tumultuous. Marked by disruption, repeated lockdowns and global challenges, the last 12 months have been challenging for us all.
But as a new year begins, there’s plenty of positive sentiment in the air: almost two years into the pandemic, people are looking to the future with optimism. But what does this mean for the property market, and property finance more generally? From asset values to trends in finance, here are our thoughts on the year to come.
Property predictions and general HNW market
Unsurprisingly, the last two years saw a spike in demand for larger properties; more space and gardens were high on the agenda for many buyers. This, along with the temporary absence of international buyers, meant demand for traditionally popular assets (such as flats in Prime Central London) declined slightly.
Interestingly, we’ve seen a spate of domestic buyers recently returning to Central locations, a testament to their lingering popularity. Many large companies in the City have established that they won’t be allowing fully remote working long term, meaning the rush to leave London has definitely reversed. And in the latter half of 2021, the £5 million+ property market in London found itself reinvigorated by the return of international high net worth buyers.
So, we very much expect demand for high-value properties across the UK to continue into next year. Whether it’s luxury country estates with strong transport links into London, or Prime Central London apartments that deliver the ultimate in city living, demand for the UK’s prime market is incredibly strong. And with excellent availability for mortgage finance, there are few barriers standing in the way of securing your dream property.
Market stability abroad
A great deal of international property activity was stilted in the first half of last year – but if early signs are anything to go by, 2022 will bring a great deal of movement in HNW locations across the world.
We’ve spoken to many clients who are keen to purchase beautiful and private holiday homes in the South of France and Monaco – although it’s worth noting that price growth is not strong in the region, so this is unlikely to be a favoured option for those looking to make money in the short-term, and should instead be viewed as a lifestyle investment. The French government is introducing new laws and regulations to make second homes and investment purchases more costly, so prospective investors should definitely seek expert advice before moving forward.
Generally speaking, investors are feeling far more relaxed about the ramifications of Brexit than they once were, and we expect to be busy with enquiries next year across Paris, Berlin and Zurich. Interestingly, we’re also seeing significant interest in property in the US. New York has always been a popular investment spot for HNW investors, but Los Angeles is growing in terms of its reputation as an investment spot.
Potential risks for international investors range from changing tax and regulatory environments to economic slowdowns and even concerns about rising sea levels in certain locations. But after a challenging few years for the global economy, property has emerged as one of the most reliable investment classes there is.
Inflation and cost of finance reflections
At the last meeting of the Bank of England’s Monetary Policy Committee, the decision was taken to raise the base rate from 0.1% to 0.25%, and many predict we’ll see further rises throughout 2022. With interest rates having sat at historic lows for so long, the reality for many is that borrowing will become more expensive over the next year – which is particularly concerning for those who have large mortgages, on which even a fractional interest rate rise could have a significant impact.
The good news? The market itself is still very competitive, and there’s plenty of lending available – even more so if you have access to private banks, family offices and other less traditional lenders.
As always, there are ways to mitigate the risk of rising borrowing costs, so long as you work with advisors who can act swiftly and negotiate for the best deal. At Articus Finance, we’re already seeing many clients move quickly to lock in fixed-term mortgages at a low rate now, before further rises take hold.
We’re also seeing banks offer longer product terms for those in a position to lock in a rate for a long time – for example, those purchasing a large family home which they expect to live in for more than a decade, or long-term investment in a burgeoning international hotspot.
Positive sentiment and Articus plans
From Brexit to changing tax rules and the pandemic, there’s no doubt that the property market (and financial markets more broadly) have faced a series of blows over the last five years. But if we’ve seen anything, it’s that high-value property in key locations continues to be one of the strongest and most stable asset classes around the globe. In times of disruption, many investors want tangible assets with less perceived risk, and property continues to be that asset class.
That said, it’s interesting to note that times of disruption also tend to bring a certain type of boldness and strategic creativity to the forefront – and over the next year, we expect to help a growing number of clients achieve their financial goals by providing leverage against assets including listed stock portfolios, aircraft and boats. Ultimately, the cost of borrowing currently remains very low, and there’s a period of time in 2022 where this should still be the case. Savvy investors are taking advantage accordingly.
As for Articus, the future is bright. We received enquiries for over £1.2 billion of lending in 2021, and were delighted to have served over 2,000 clients, 65% of whom were based overseas. In response, we doubled our staff headcount, welcoming both exceptional brokers and valued support staff to ensure we can offer exceptional service from beginning to end of your journey.
Whatever happens next, 2022 is set to be an interesting year – and we look forward to supporting our clients through it all.
