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15 August 2016

Shawbrook Commercial “Client Barometer” reveals customer expectations for the market

Despite uncertainty around the property market post-Brexit, investor confidence in the lending environment remains unchanged, according to the latest Shawbrook Commercial “Client Barometer”*.

The survey, which explores the views of property professionals in the wake of the UK’s decision to leave the EU, reveals that 57% of property investors are feeling confident or fairly confident about the lending environment over the next six months, compared to 58% in January 2016**.

This confidence is reflected in the proportion of investors looking to buy an additional BTL over the next year, 58% compared with 56% in January 2016, and suggests Brexit has not had an immediate impact on people’s future investment plans and their attitudes towards BTL investing.

While Brexit may not have de-railed investor plans, it is still cited as the biggest challenge this group will face over the next year (according to 32% of investors). While the majority remain unsure of what impact Brexit will have (44%) and how the subsequent changes to property prices and market competition will impact them, 42% think the result will negatively impact property investors. Only 14% believe the result will have positive implications.

Similarly, property investors are feeling a lot less confident about the prospect for the UK economy with 48% of investors fairly concerned or very concerned about the economic outlook, an increase of 19% from six months ago.

Investors that are more negative in their outlook believe that falling house prices would be the main negative consequence of the result (54%), followed by decreased competition (23%). In contrast, for those that predict positive outcomes most see decreased competition in the market due to uncertainty as the main positive consequence (37%), followed by less regulation and red tape (24%) and falling house prices (20%).

Property prices are one area which property investors expect to see significant changes over the next six to 12 months. In January 2016, 67% of property investors predicted a small increase in property values and 6% predicted a small decrease. The latest figures reveal that 42% are anticipating a small decrease in prices and only 21% are predicting a small increase over the next 12 months.

Stephen Johnson, Deputy CEO and Managing Director of Property Finance at Shawbrook Bank comments: “As a lender, it is encouraging to see sustained confidence in the lending market since the beginning of the year at a time when the sector has seen a great deal of change.

“Seeing this optimism reflected in investors’ plans to acquire new BTL properties is a promising sign that the specialist market shows no signs of slowing despite uncertainty.

“At Shawbrook, we have not yet seen any real change in customer behaviour and there is still a great deal of activity across the Commercial business. While the aftermath of Brexit provides uncertainty for landlords, with many waiting to see the impact on house prices, tenant demand and housing supply - there is also opportunity, with investors potentially benefiting from this pricing drop to secure property more cheaply.

“Whilst the full effects of the Referendum result remain to be seen, it is clear those who have confidence in their business model and a sensible level of gearing are best placed to prosper through any period of uncertainty.”