According to a study by Savills and Shelter, over 300,000 planned new homes may remain on the drawing board over the next five years, the equivalent to the Government’s annual target of new homes. Lockdown-induced delays in construction and the subsequent recession will cut the number of new homes being built by 85,000 this year alone. Worryingly, construction of the cheapest social housing will suffer most. The research shows that social housing could fall to a tragic low of 4,300 units annually – the smallest number since the second world war.
But Mr. Johnson and his promise to ‘level-up’ the UK economic growth may find an unlikely ally to tackle the housing crisis in the PropTech and FinTech industries. At a time when large-scale public borrowing will see an unprecedented deterioration in public finances, there will be an increased pressure for the Government to consider new and innovative sources of funding, especially peer-to-peer (P2p) property lending, to tackle the housing shortage. Alternative lenders can and must be part of the solution to help deliver Mr. Johnson’s vision and build the homes the country needs by helping channel funds from private investors.
What does Boris Johnson’s ‘build build build’ mean for PropTech?
Let’s face it, real estate and particularly real estate lending are not known as industries which readily embrace change. The nature of the asset class, which comprises large heterogeneous assets traded in a largely private market, is perhaps a good reason for this. Homes may be too important a part of a private portfolio to take any risks with the process whereby it is traded, lent against, held or valued. It may also be the case that there is an agency problem: the professional advisors that dominate the transaction process clearly have an interest in protecting their income sources, so chartered surveyors, brokers and lawyers might all be expected to resist tech-driven innovations designed to ‘disrupt’ their work.
But this is not the case in the lending market where the larger traditional lenders are no longer active in many specialist parts of the market and thus happy to work alongside specialist finance providers. Consequently, we are witnessing a silent revolution consisting of the digitalisation of the lending market and a discernible new explosive wave of technology innovation in the real estate lending market. Platforms such as Blend Network enable a wide range of investors – private retail investors, HNW, family offices and institutional investors – invest in property deals pre-vetted and pre-approved by their expert property lending teams.
Killing two birds with one stone
In this manner, P2P property lending platforms are solving a double problem. On the one hand, they are helping investors deploy funds and access yield through impact investing. For example, investors on Blend Network have received an average 10.5% return p.a. over the past two years. On the other hand, they are helping SME property developers and small construction companies access the funding they need to build more affordable homes. For example, Blend Network has helped fund close to 50 low-cost housing projects across England, Scotland and Northern Ireland over the past two years. Furthermore, P2P property lending platforms they are helping the Government tackle the UKs urgent housing crisis.
In summary, the digitalisation of the property lending market is a leapfrog moment for UK housebuilding by allowing investors to participate in and be part of the solution to the housing crisis and make a great return on their investment while helping build much-needed homes.
