UK investors looking beyond their homes to increase exposure to property

Almost half (44 per cent) of retail investors want to enhance their exposure to the UK property market by other means than owning their home, according to a new study by peer-to-peer lending platform, Crowdstacker.

The biggest factors driving investor demand are the long term growth of the UK property market (62 per cent), followed by strong levels of rental income (59 per cent) and forecasts suggesting that prices will continue to rise (50 per cent).
 
Despite strong levels of appetite for property as an asset class, the research highlights the main reasons deterring investors from buying directly into bricks and mortar: over a third (36 per cent) of investors are concerned about the risks involved in managing properties; 30 per cent are put off by the transaction costs and the risk that prices may fall; 28 per cent wouldn’t have time to manage a property and one in four (25 per cent) can’t afford a deposit or a second mortgage.
 
The study reveals that almost three-quarters (73 per cent) of investors would be interested in putting their capital to work through a new low risk product that offers a return of over 5 per cent a year by making property loans to developers, landlords and property professionals. 
 
The research showed that investor appetite for this opportunity was stronger than for buying shares in companies related to the property market and investing in property funds.
 
In response, Crowdstacker is providing investors with the opportunity to lend to Amicus Finance (Amicus) and is offering 5.43 per cent annual interest over a term of just 18 months. The borrower, Amicus, will use the funds to finance short term property lending to commercial and private borrowers.
 
According to Amicus, demand for short term property lending is booming in line with the housing market. It has grown from around GBP1.4 billion in 2013 to an estimated GBP3 billion annually today. Many traditional banks have withdrawn from the short term lending sector to focus on standardised long term loans, enabling specialist alternative firms such as Amicus, to rapidly grow their market share by offering high quality borrowers a faster and more efficient service.
 
Amicus CEO John Jenkins, says: “Many investors would like to increase their exposure to the UK property market above owning their own home, but many are put off the idea of buying a second one or can’t afford to do so. Investors often have a limited appetite for alternatives such as property funds or shares.”
 
Karteek Patel, CEO of Crowdstacker, says: “Effectively this is an opportunity to ‘lend to a lender’ which is not only one of the market leaders in its field, but which also operates in the buoyant property sector.
 
“Investors are provided with an exciting opportunity to receive a market beating return by sharing in its success. Its short-term mortgages are secured on UK property at an historic average ‘Loan to Value’ (LTV) of 60 per cent and Amicus ensures that it has personal guarantees from directors.  We believe it has an extremely low default rate and therefore can offer investors a high degree of security.”
 
Amicus’s property loan portfolio is currently made up of 90 per cent residential properties and 10 per cent commercial properties, with 70 per cent located in London or the South East. Its loans are repaid, on average, in 8.5 months and it typically lends between GBP50,000 and GBP5 million. It won Bridging Lender of the Year at the Bridging and Commercial Awards, and has lent more than GBP500million in 800 loans over the past six years.