Low interest rates and a demand unmatched by supply have pushed house prices up to a record high of £300,000. (1) Between January 2002 and January 2016, average house prices rose from £121,446 to £290,963. (2) In that space of time, average annual real earnings dropped from £22,778 to £22,273 respectively. (3) So, as house prices rose by 139.6%, earnings dropped by 2.2%. Individuals wishing to get on the property ladder might find themselves running up a downwards escalator, struggling to play catch up against ever rising odds. In fact, statistics published in 2015 revealed that it would take 97 years to save up for a house deposit in London, 55 years in Bristol and over a century in Brighton. (4) Quite literally, most individuals don’t have the time or the money.
It should therefore come as no surprise that the number of people who own their own home is at its lowest since 1985. (5) The private rental population has consequently rocketed to a total of 4.5m households. Between 2000 and 2015, the number of people in private rentals rose from 11% to 25% respectively. During that same time frame, the number of households living in an owned, mortgaged property dropped from 55% to 41%. (6) At this rate, according to Generation Rent, “there will be more private renters than mortgage holders in just five years’ time.” (5)
At one point in time, “owning a home was considered a safe and sure bet” for creating long-term wealth. (6) Now, however, it’s likely that the asset class has become out of reach, reserved only for those with access to large amounts of capital. As a consequence, the ability to reap the potential benefits of property as an asset class has become somewhat exclusive.
Enter Proptech; a fusion of “property” and “technology,” the industry has begun to provide an alternative route into all things property; from property rental apps to alternative property investment, from home automation products to online mortgage lending.
Let’s take a look at traditional property investment, for example. Some of the potential drawbacks include saving up for a deposit, worrying about the mortgage, handling any repairs and managing tenants. The system is antiquated and arguably a bit of a headache. That’s where Proptech firms like Property Moose come in. You simply invest and we’ll take care of the rest; the property sourcing, the tenancy, the repairs and the legalities. We’re giving retail investors the chance to invest in a variety of property investments, from just £10. Investors have the ability to earn rental income proportionate to their shareholding and potentially benefit from capital growth. In addition, under our unique nominee structure, investors hold full voting rights in relation to the property. So, from the comfort of your own home, you can become a landlord without having to change a lightbulb.
Diversification is considered to be the secret to mitigating market unpredictability and reducing portfolio loss. (7) However, as we’ve seen, traditional property investment holds a high entry point for each individual asset. As a result, even the individuals that could purchase property might be limited to buying one or a small number, reducing their ability to build a diverse portfolio.
Property investment in the world of Proptech provides a potential solution to this, too. Let’s say for example that you liked the look of property as an asset class, but only wanted to devote £100 to it. With Property Moose, you could browse through our handpicked investment opportunities, make an informed decision based on each opportunity’s statistics and quickly build a diversified portfolio. You could spread your capital across:
- A loan note with a fixed return of 7% p.a.
- A private equity development which held a projected return of 43.35% over a 36-month term
- A modern, 2 bedroom buy-to-let opportunity in North Yorkshire with a projected yield of 6.28%
- A buy-to-sell (otherwise known as ‘flipping’) opportunity, with an assumed deal period of 6 months.
The growth of both industries is believed to be driven by consumers’ desire for change and alternative solutions. This newly created marketplace offers a space for change, and brings new life to traditional financial systems. In attempt to capture this new marketplace, it’s likely that larger financial institutions could use the learnings of such innovative start-ups. This could potentially even lead to some of the acquisition or strategic investments of some of the new businesses by the venture arms of banks or wealth managers. In fact, research detailing how big banks plan to deal with fintech firms revealed that 64% will look to partner or acquire, and 20% agreed they are a genuine competitive threat. (8)
At the heart of this new marketplace, has, and should continue to be, the customer. There’s a potential danger of proptech and fintech companies to stereotype their customer base to a young, tech-savy persona. The consequential exclusivity of this could bring progress back to square one; the exclusivity of traditional property investment could become the exclusivity of technology. It is crucial that customer-centric growth remains at the heart of the industry’s development.
Though still nascent, we believe the industry boasts an incredible amount of potential. Watch this space.
Written by Jenna Kamal
Sources
- http://www.cityam.com/258906/average-house-price-england-and-wales-has-gone-above-300000
- http://www.rightmove.co.uk/viz/house-price-trendometer/
- https://www.measuringworth.com/ukearncpi/
- http://www.cityam.com/226917/uk-and-london-house-prices-how-long-does-it-take-to-save-a-deposit-for-a-property-104-years-for-people-in-brighton
- http://www.generationrent.org/home_ownership_at_30_year_low
- https://dailyfintech.com/2017/02/22/can-proptech-mixed-with-fintech-save-generation-rent/
- http://www.frontierim.com/files/file/download/id/589
- https://www.starlingbank.com/wp-content/uploads/2016/09/starling_fin_tech_report_final.pdf
Disclaimer and Legals
Property Moose does not provide any advice in relation to investments and you must rely on your own due diligence before investing. Please remember that property prices can go down as well as up and that all figures, rates and yields are projections only and should not be relied on. If in doubt, please seek the advice of a financial adviser. Your capital is at risk if you invest. This post has been approved as a financial promotion by Resolution Compliance Limited.
Property Moose is a trading name of Crowd Fin Limited which is an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (no: 574048).
