Having emerged just over ten years ago in the aftermath of the global financial crisis, alternative lending has come a long way and is playing a significant role in the mainstream financial ecosystem.
Yann Murciano, CEO at alternative lending platform Blend Network, looks at the three trends we are expected to see in the specialist lending market next year.
Trying to forecast any trends is never easy, especially at the end of a year that saw a tail-wind event hit the world in a manner very few, if anyone at all, would have predicted. However, I believe that thinking about the trends we are likely to see – or we would like to see – is helpful by enabling us to steer our business in the right direction for the year to come. So, as we walk the last steps of what has been a challenging year that also presented many fantastic opportunities to grow our businesses, I would like to pause and take a few minutes to reflect on the three trends we are likely to see in the property market over the next twelve months.
First, we expect the recent strength in the UK property market to cool down, especially in Q2 and Q3 when the unprecedented government support measures are expected to come to an end. This view is supported by others too. According to Capital Economics’ latest UK Housing Market Focus dated 27 November, while policy support in the form of stamp duty holiday has likely reduced and delayed the impact of the pandemic on UK house prices, it has not removed it altogether.
Consequently, Capital Economics expect the pandemic to take its toll in 2021 with a 5% dip in house prices. However, they expect the correction to be smaller than in previous recessions and leave prices slightly higher at the end of 2021 than they started in 2020. In its latest House Price Index commentary, Nationwide also threw doubt into the sustainability of the recent house price strength by pointing out that labour market conditions had weakened in the three months to September with the unemployment rate rising to 4.8%.
Second, we expect to see a bigger role for alternative finance providers in the property market next year, especially across the development finance and bridging markets. We believe that this will likely be supported by a closer collaboration between traditional lenders and alternative lenders under the HMRC’s Bank Referral Scheme (BRS) launched in 2016 to help businesses who have been unsuccessful with the major banks find finance through alternative lenders. The Covid19 pandemic provided an opportunity for alternative lenders to show their worth and given the success of alternative lenders in channelling funding to small businesses and SMEs this year, we believe that the collaboration between them and traditional lenders is likely to strengthen over the next few years, starting with next year.
Third, we expect to continue to see a two-speed UK property market whereby some pockets of the market continue to outperform other regions, as has been the case over the past year. In particular, we expect the Northwest and Midlands to continue to display strong growth and outperform the South and Southeast following the government’s plan to ‘level-up’ the UK’s economic growth.
In summary, we do expect to see a gradual return to normality both across the broader economy and in the property market, but such a path to normality will likely not be without hiccups. There will be plenty of opportunities but also numerous challenges on the way back to normality. So, ensure you look out of them to capitalize on the opportunities!