As one decade ends and a new one begins, I want to reflect on the 2010s and what has been a bizarre decade from the perspective of the housing market.
The decade started with the property market pulling itself off the floor after the slump, caused by the credit crunch. There had been a dramatic slump in housebuilding, as credit lines were pulled with banks and lenders desperately trying to rebuild their balance sheets. The development finance lender where I worked at the time, was getting calls from prospective borrowers, asking not what our rates were but whether we were lending. We were one of the few funders who still were!
The then Labour government were struggling under the precarious public finances, to be replaced by the Conservative and Liberal Democrats coalition. The next few years were characterised by a housing market that was stymied by a lack of credit both for mortgage market and development. House prices did fall initially but the lack of new homes being built, combined with low interest rates maintained a lack of affordable housing. The political world turned upside down in 2016 with BREXIT, the rise of the hard left and the hard right.
Economically, we had the Bank of England continuing to respond to the ongoing crisis, caused by the financial crash, by keeping interest rates low and injecting trillions of pounds of new money into financial systems to ward of depression. This financial wizardry of quantitative easing, counter intuitively seemed to push up asset prices (including house prices) but failed to create inflation. 10 years on we still have historically low interest rates at 0.75%, and little indication that the economy is in a state for them to be raised significantly.
From a housing market perspective throughout this period, various housing ministers have tried to fix the housing crisis. It has been a crisis largely characterised by the chronic lack of supply of housing, leading to rising house prices and rents preventing first timers getting onto the housing ladder and private renters facing crippling rent bills. We saw the introduction of “Help to Buy” in various guises, increases in stamp duty both in terms of rates and also an additional levy on second homes, and numerous white papers designed to solve the problem. None of them have got to the root of the problem; which is the need for more new affordable homes. The new Conservative government has promised at least a million new homes this parliament, called for a shaking up of the planning system, and proclaimed that there would be a 30 per cent discount on new homes to local people and key workers. The proof will be in the pudding and I hazard a guess that Boris Johnson might get BREXIT done but will struggle to fix the housing market.
Finally, I thought I would list a few things that I have learnt over the last decade in the short-term finance industry, they are simple but worth remembering:-
Always assess the level of risk and whether you can live with the downside.
To minimise risk aim for numerous smaller deals rather than a few large ones.
Work with experienced and trustworthy people
Know your own strengths and weaknesses and surround yourself by colleagues who have complimentary skills.
Avoid what you don’t understand.
Lend near where you are based so that you know your location or at least if there are problems you can easily visit the site.
I wish everybody a very happy and productive new year.