By Simon Heawood, CEO & co-founder of Bricklane
Change is in the air for owners, for investors, and for growing numbers of long-term renters - those who find it impossible or undesirable to interact with the property market in the same way their parents and grandparents did.
First - investment. The impact of the policy assault on individual buy-to-let is yet to wash through the market, but as new tax-returns are filled in, and fixed-term mortgages come up for renewal against a backdrop of rising interest rates and tightened lending rules, many will recognise that the sums no longer add up.
We anticipate steadily increasing outflows from the buy-to-let market, in favour of a continual consolidation of portfolios around professionalised, large scale landlords, who in turn benefit from scale advantages, tax-efficiencies, and professionalised approaches to investing and driving up tenant service provision.
Second - renting. A perfect storm is brewing for landlords looking to property simply as a financial asset. Policy makers across the political spectrum are acknowledging that home ownership is valuable because it affords permanence and security, and not just for the financial returns which placated constituents of yesteryear.
Following several budgets’ worth of tax-tinkering, we expect policymakers to recognise that giving a lucky few that final push onto the first rung of the housing ladder simply isn’t enough, and in 2018 there will be renewed political focus on quality of tenancy contracts, and increased recognition of the financial burdens of renting.
With renting increasingly the norm, looking forward the most successful landlords will learn to enjoy the commercial advantages of happy, stable tenants (as by and large they have on the continent). Whether voluntarily or forced by policy, we expect to see longer term leases with caps in rent rises gaining in popularity.
Next: Proptech. The irrationalities of the housing market have attracted attention from new companies wondering how to make things better, and take their cut.
Disruption from proptech is currently taking many different forms: battles in property management, property listings and mortgages are already underway, and the fruit is low-hanging.
The trend in expectations is clear: residential property services need to be digital, simple, bespoke and cheaper than they currently are. Established providers will innovate or partner, and become visibly more sophisticated in their digital efforts to retain market share.
But back to the problems of participation. A growing number of fintech companies are investigating new modes of property ownership and collective investment schemes, transforming the shape of the property ladder by providing new opportunities for investment and co-ownership. Platforms facilitating equity participation in the housing market, as well as lending against it, will continue to move into the mainstream.
At worst they amount to timeshares with websites, and care needs to be taken over liquidity and tax treatment, in particular. At best these platforms can transform the terms on which people engage with the most valuable UK asset class. 2017 saw the first major institutional involvement in the space, with Westpac’s investment in Australia’s Brickx. 2018 may see the first major UK financial institution take an interest.
Increasing wait times for that first step on the ladder mean more space for novel rental experiments such as WeWork’s WeLive concept. While currently live in DC and New York only, and the proposition clearly isn’t for everyone, real estate companies will remember the explosive popularity of flexible coworking spaces, and 2018 could see increasing UK investment in the space.
Whether you’re an investor, renter, or service provider, the terms of engagement are shifting, and the only certainty in 2018 is further change - it’s a Brave New World.