The countdown is on to 31 January when the UK is expected to leave the European Union. Between now and then, a generation election is scheduled for December 12. But will the upcoming election put an end to more than three years of Brexit uncertainty? Alas, we believe the election is unlikely to make Brexit any clearer. Here, we consider the impact of events so far, lessons for investors and how they can use these going forwards amid ongoing economic and political uncertainty.
- ‘Selective’ property investment still a good idea
There has been never-ending news and headlines about the endless wrangling over Brexit taking its toll on the UK property market. While that is true of areas such as central London and other areas more exposed to the international flow of capital, the reality is that the market is holding up pretty well across most of the UK regions. Indeed, last year house prices were up by 5% YoY in Northern Ireland, 4.4% in the East Midlands, 4.3% in Wales, 4% in the West Midlands and 3.9% in Yorkshire [1]. London was the only region where prices were down YoY last year, while even the Southwest saw a comfortable 2.3% YoY growth.
We believe ‘selective’ property investment is still a good idea to access above-inflation returns as the UK’s structural shortage of housing means that the market remains well-supported, with or without Brexit, with or without deal. Blend Network offers investors access to 8-12% return p.a. property-secured loans across some of the UK’s best-performing property markets.
- A weaker sterling isn’t necessarily bad for investors
Sterling has been on a roller-coaster ride since the Brexit vote in June 2016 [2]. Yet, a weaker pound is not necessarily bad news for the UK stock market. Why? Many of the UK’s FTSE100 companies make a large chunk of their revenues overseas. So, a weaker exchange rate is good to these companies and their investors, boosting their profits when they are moved back into sterling. Conversely, a strengthening pound may result in profits made overseas by UK companies are reduced when shifted into sterling.
Of course, volatility does remain a key issue especially as interest rates are likely to be cut as markets and we expect. In such an environment, we believe fixed-rate yield products remains investors favourite asset classes.
- The benefits of diversification
In the current uncertain economic environment, diversification plays an ever more important role in balancing investors’ portfolios. If investors take a broad and diversified approach by investing in different geographical areas, the highs and lows of Brexit should hopefully have limited impact.
Diversification is also a mantra that we have always emphasised and continue to do so for lenders on Blend Network loans, as part of a diversified basket of peer-to-peer loans. For example, lenders on Blend Network who would have invested in our last 10 loans would have made around 10% p.a. by lending in a diversified portfolio across East Anglia, West & Midlands, Northern Ireland.
[1] Nationwide House Price Index
[2] https://markets.ft.com/data/currencies/tearsheet/summary?s=GBPUSD
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