Property Market Monitor: March 2021

Following a short-lived slowdown, UK annual house price growth rebounded with renewed vigour in February. January saw price growth slow down for the first time in six months, but according to the Nationwide House Price Index, February saw prices up by an impressive 6.9% year-on-year – see chart of the month. Many market participants who had expected house price growth to ease further ahead of the end of the stamp duty holiday planned for 31 March were taken by surprise by this sharp pick-up. Of course, since then a plethora of ‘good news’ for the property market, i.e. the extension of the stamp duty holiday and 95% government-guaranteed mortgages for first-time buyers announced in the Spring Budget on 3 March, have injected a considerable amount of optimism and confidence into the UK property market.

Chart of the month: Monthly UK house price, annual % change

Source: Nationwide House Price Index, Blend Network

Market Commentary

• Following a very short-lived slowdown at the start of the year, the momentum seen in the UK annual house price growth over the past six months returned in February. February saw prices up by an impressive 6.9% year-on-year, the second strongest reading since December 2014. The performance of the UK housing market amid the pandemic has been nothing short of impressive. Indeed, since July 2020, UK house prices have increased by an average 5.4% year-on-year every single month, while so far in 2021 prices are up by an average 6.7% year-on-year in the first two months.

• Following the positive property market news of stamp duty holiday extension and more support for first-time buyers announced by the Chancellor Rishi Sunak, we do expect the price momentum to continue over the next few months. The stamp duty holiday extension allows anyone buying a home worth up to £500,000 before the end of June to not pay tax, potentially saving buyers up to £15,000. We do expect this to be particularly positive news for the segment of the market we operate in at Blend Network because we operate in exactly that price bracket of <£500k per housing unit.

• Looking ahead to 2021, we do believe that our strategy at Blend Network of funding low-cost housing targeted to first-time buyers is now more relevant than ever before. Since we launched, we bet on this strategy because we identified that the UK has a structural shortage of housing. Our strategy of funding £100-200k flats or £200-400k houses has so far proved right and we believe this will be the case even more so now.

Figure 1: First time buyer house price to earnings ratios (Q4 2020)

Source: Nationwide House Price Index, Blend Network

As mentioned, we at Blend Network very much welcome the strength of the housing market and the positive news announced in the Spring Budget. We believe this could mean many of the developers we speak to and who had been sitting on projects awaiting more clarity, will decide to go ahead with their projects, which of course could mean more great risk/reward, 8-12% return p.a., property-secured loans for our hundreds of yield-seeking investors.

Your capital is at risk if you lend to businesses. P2P lending is not covered by the Financial Services Compensation Scheme. Investments are illiquid (the inability to sell assets quickly or without substantial loss in value). Past performance is not a reliable indicator of future results.

Blend Loan Network Limited is an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (FRN. 574048)