Big British businesses are about to compete with you for property

Big British businesses are about to compete with you for property

In many ways it was probably fairly inevitable that at some point the big boys were going to start getting involved in residential property, but it has big ramifications in any case.

Realistically, if we look at the market conditions it’s perhaps surprising that it didn’t happen earlier. In the wake of a global pandemic, the worst for a century, and one of the worst and most pronounced recessions in modern history, there were many feeling very nervous indeed about how the UK residential housing market would cope.

It was a fair and reasonable fear – with the economy essentially shut down to all but necessary activity, there was basically no activity to speak of. That included property because in the early days, back in March and April of 2020, the ability to move into a new house was banned, and estate agents were forced to close. There was a deadline set for property exchanges and for the best part of two months no sales or activity was allowed to happen.

Even the most optimistic economists would likely have looked at those set of circumstances and felt a pang of anxiety over the ramifications.

The government stepped in however with a raft of measures to ensure the health of the market and allowed stamp duty holidays, as well as other tax breaks and measures and, quite incredibly, the market didn’t even drop, staying flat for a short time before growing again.

Remarkably, that trend has continued with some of the strongest growth performance in decades, and now business is taking notice.

Businesses buying residential property

As reported by The Economist, ‘An internal job advert at Lloyds Banking Group has revealed that the lender plans to enter the build-to-rent sector, with an ambitious target of owning 50,000 properties by 2030. John Lewis, which sells everything a dinner-party host might want for the home, announced earlier this summer that it plans to build 10,000 rental properties. Large insurance companies, such as Aviva and Legal & General, have entered the market in recent years, as have several private-equity firms.’

This represents an astonishing vote of faith in the UK market with renowned businesses set to invest billions over the next 10 years.

Household names are now very much in the business of being landlords as they spot the opportunity for growth where many other areas of the economy are expected to struggle or take more time to recover.

So, what does that mean for us as investors?

Frankly, it means greater competition for scarcer resources. Ultimately, 9 times out of 10 that equals price rises as well as rent rises and growing yields.

This is, of course, good news for those invested in the market currently, however, for those who have designs on growing their portfolio (and why wouldn’t you?) it’s going to mean a fairly high price of entry in the not-too-distant future.

What to do then? Realistically, speak to one of the team about your plans and how we might be able to bring them forward. We can offer advice and resources to help you build your portfolio now and make the most of any coming price increases, and we’d be happy to hear from you.

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