It can seem a little counter-intuitive to talk about investing or expanding your portfolio in the midst of a global pandemic, but as we’ve written about at length this is no ordinary time we live in and this is no ordinary economy.
Some of the greatest and most successful investors have made their fortunes in the middle of a recession, or even a depression. The legendary Wall Street investor Warren Buffet said “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it”.
Whilst that may not ring strictly true for property investment as such, there’s still value in looking at why such a situation can bring about a fertile atmosphere for buy-to-let landlords and investors amidst the uncertainty.
Property by its very nature tends to be a solid growth investment for the long-term, and is often shielded from some of the more tumultuous fluctuations of the markets. That’s not to say there aren’t ups and downs, but over the course of 10 to 20 years, there isn’t a single period in modern British history where your investment wouldn’t have grown in value.
So where does that leave today’s property investors? Is now a time to hold steady and ride the storm? Or is there potential to get ahead of the curve and be in an even stronger position once things return to normal? We’ll look to answer those questions.
Historically cheap borrowing
One enormous aspect to take into consideration when thinking about expanding a buy-to-let portfolio is the historically low cost of borrowing currently on offer from the main high street banks in the UK.
It’s been noted by the BuyAssociation that once you get into the kind of territory of near zero percent lending costs that we’re in right now, it’s almost like taking free money or being paid to invest your money.
As they note, “landlords are being urged to take advantage of the expanded market. Whether that involves recalculating your portfolio financing, or investing in new property, the current lending environment is positive for most investors right now. Between May 2020 and June 2020, buy-to-let product numbers have surged by 280.”
Given the challenges of recent years with tax changes and new laws, it’s really positive news for the buy-to-let market, which now seems on the precipice of a new and exciting time.
Lenders looking for business
Large institutional lenders aren’t multi-billion pound organisations for no reason, and you’ll often find they’re way ahead of the curve themselves, so it’s always worth keeping an eye on what they’re up to if you want to get an idea of which way the market is moving.
With that in mind, HSBC has announced it has already cleared its backlog of applications and is ready to take new buy-to-let applications just a few weeks after re-opening. This may seem like a small announcement but that’s really quite some effort it’s put into clearing that amount of work in order to be able to take on new customers as quickly as possible at a time where it could be argued that the economy has never been more volatile.
Further to that, there has been a quite interesting influx of interest into residential and buy-to-let investments from the city in London and from wealth funds, which classically concentrate on the stock market.
For example, as quoted in the Financial Times, William Buckhurst, head of fund research and investment director at Vermeer Partners says: “We do not normally invest in residential property given that our client base tends to be already very overweight in this sector and it is hard to see an immediate move upwards in UK house prices given the inevitable economic recession that is going to follow Covid-19; however, long-term the outlook for UK house prices looks positive given the dearth of supply, changing demographics and low mortgage rates”.
It’s not for us to ultimately say whether now is a good time for you to expand your property portfolio, however, it’s certainly worth taking note of the signs and trends already out there in the wider market.