Investor insights: August letter from the MD

LendInvest’s Investor insights is a monthly commentary by LendInvest Capital Managing Director Rod Lockhart, aimed at providing insight into the economy, the wider property investment landscape and LendInvest business strategy.

One of the best things about summer is the fact that Westminister shuts up shop for a number of weeks, leaving the rest of the country to get on with business, undisturbed by major political and policy upheavals getting in the way.

This summer has offered extra-welcome respite this year. After the triggering of Article 50, the beginning of Brexit talks, a snap election and a surprising election result, the relative quiet of July and August has allowed many in business to enjoy a period of ‘business as usual’.

All quiet on the economic front 

Summer has proven relatively quiet in the economy too. UK equity indices continue to perform well, adding confidence and stability after not inconsiderable periods of upheaval. The relative strength of these markets has contributed to investment inflows; in the second quarter of the year, UK GDP grew 0.3%. This was greater growth than in the first quarter and keeps the country on track for 1.6% GDP growth for the year as a whole.

Inflation figures for July held steady at 2.6%, which came as a surprise to many commentators after the 2.9% reading in May. Whether this is sufficient data to imply a trend remains to be seen but the Bank of England is principally budgeting for a rise to 3% by October. 

The housing market remains stable

The UK property market has shown green shoots after a tentative first half of the year. Halifax’s House Price Index in July recorded a house price pick-up of 0.4%, it also estimates that the average price of a UK home is now £220,000. Month-on-month mortgage borrowing in June was broadly flat, with 40,200 new mortgages approved versus the 40,287 clocked up in May. However, gross mortgage borrowing of £12bn in June was up 6% on the year.

We would expect to see house price growth remain in the black for the rest of the year, considering the availability of low rate mortgages, the proliferation of first time buyer schemes, the knowledge that Help To Buy has a shelf-life (ending in 2021), and the unendingly fundamental lack of housing stock. Industry experts predict that this desperate housing deficit – and in particular, the profound lack of new build housing – looks set to dominate the agendas at all the major political parties’ annual conferences in September and October. Where LendInvest can contribute to this debate, highlighting the impact and effect of our borrowers’ own projects, we look forward to doing so.

 Back to business! 

And so as we write this note, the familiar cogs of government are whirring back into action. Theresa May has returned from her summer rest this week and, together with her Brexit Secretary, David Davis, is set to launch a series of critical position papers. It will be interesting to watch how these measures and plans for our exit from the EU incorporate (or don’t) the Chancellor’s proposed ‘off the shelf’ solution that seeks to provide a transitionary period and maybe even retain access to the single market. While we might have revelled in a quieter summer, we can be sure that the autumn will be hotting up quickly.

Kind regards,

Rod Lockhart