Are we entering the most buoyant period in history for bridging providers?

The UK property market has been the busiest we can remember since that rush to the finish line back in 1988, when then-chancellor Geoffrey Howe abolished multiple mortgage tax relief.

There were more than 1.4 million residential sales in 2021, up by around 40% on normal levels, and this transaction fest has given property buyers a thirst for deals. Their enthusiasm has continued into 2022, albeit with estate agents’ stock much reduced from last year because many sellers pulled their decisions forward to take advantage of the stamp duty holiday. Demand remains strong.

Transaction chains will be more vulnerable

Loan rates, despite inflation, are comparably benign relative to our fiscal history. We may see the Bank rate go to 1% this year, and homeownership by virtue of that become slightly more spicy from a serviceability perspective — but only a little and, I’d wager, temporarily.

More price rises

Accordingly, house prices will increase again this year. The latest stats from Rightmove show that sellers priced their properties at the most optimistic levels ever in February. Some regions saw a push of over 5% from January, and there was a general UK rise of 2%, month on month.

Reuters provides a quarterly overview of the property market based upon analysis from 18 experts. It predicts a 4% hike in values this year and 3% in 2023.

Loan rates, despite inflation, are comparably benign relative to our fiscal history

So, we have a perfect storm of buyer demand, lack of stock and low loan rates, plus geopolitical uncertainty and its potential impact on world economies, energy costs and stockmarket volatility. This is highly likely to promote further demand in the bridging sector.

Why? Because we will see the combination of buyers still rushing to make their ideal purchase while some sellers chicken out of deals — and vice versa. Transaction chains will be more vulnerable, therefore, and as stock becomes ever shorter those buyers that remain will turn to a means of supporting their ambitions, safe in the knowledge it won’t cost them significantly.

Lost buyers

Some sellers may lose buyers, especially if the Bank rate is pushed up again quickly in succession and if conflict in Europe brews more violently. Mismatches in seller and buyer ethos is a dynamic that is bound to prevail for a while and, where there is uncertainty and confusion, broken deals follow. And broken deals require bridging.

Second steppers will have to move fast, and faster than the sale of their own home may allow

As the London property market starts to awaken from years of Brexit anxiety, a Covid exodus and absent foreign buyers, demand is growing. My Prime London agency friends tell me that enquiries from buyers are up considerably this quarter. But this market is perhaps the most exposed to imbalance right now as sanctions on Russia bite and, potentially, assets including the grandest homes in the capital are taken out of circulation.

Absence of liquidity

Home secretary Priti Patel is said to be exploring wider and stronger options where unexplained wealth orders are concerned. And, with an estimated £1.1bn-worth of London property owned by Russians accused of links to the Kremlin, according to Transparency International, such an absence of liquidity is hardly going to assist well-heeled buyers in their search for high-end homes.

The consequence is that second steppers will have to move fast, and faster than the sale of their own home may allow.

The  property market has been the busiest we can remember since that rush to the finish line back in 1988

My view on the most recent house-price predictions is that London will lead the way and prospective purchasers won’t want to miss out on its strength.

Of course, I may be wrong. But experience, instinct and data tell me otherwise. What are your thoughts?

Mark Posniak is managing director of Octane Capital