Dear Clients, Friends and Colleagues
Since my last newsletter, we have seen the first budget post-Brexit and a clear roadmap out of lockdown for the UK, with life due to get back to normal by 21st June.
The UK is now substantially ahead of countries within the EU in number of vaccines per capita with progress reflected in reduced hospitalisations and deaths.
Our offshore jurisdictions, particularly Jersey, Guernsey and Gibraltar have seen an erratic journey in Covid numbers over the last few months but as the vaccines now roll out, we are already seeing an easing of social distancing measures, with live Covid numbers in single digits in each of these territories at this time.
There are some positive signs of growth and activity in the economy as the days grow longer, with the property market looking promising for both actual and potential buyers, supported by a budget aimed at pulling us out from under the blanket of Brexit, the pandemic and associated debts.
February saw growth of 6.9%, from 6.4% in January1 in annual house price growth with market activity enhanced by the stamp duty holiday and the fall-out from the first lockdown. Growth is expected to continue with the extension to the stamp duty holiday to 30th June2 which was announced in the budget, giving another kick start to the property market, an encouraging move for buyers, developers and lenders.
A further boost to the UK residential property market may be seen through the government’s incentives to convert “Generation Rent” to “Generation Buy”3, including loan guarantees enabling lenders to offer mortgages with deposits of only 5%. This will also contribute to general market buoyancy and activity across all price levels.
The furlough scheme (which pays 80% of employees’ wages) has been extended to the end of September 2021. Although this has protected more than 11 million jobs since March 2020, there are concerns about unemployment as this ends and if the 5% unemployment rate (December 2020)4 truly reflects the actual figure.
Recovery is also expected to see a boost from the substantial increase in Covid savings5 being ploughed back into the economy post-lockdown.
Despite the effects of the events of 2020, I would cautiously say I am more optimistic about the future now than I was a few months ago, for the UK economy, the property sector and Sancus.
Sancus continues to see a healthy pipeline in loan opportunities and origination, particularly in the UK and Ireland where the market is very active and we are getting a reputation for professionalism, experience and speed in property bridging and development finance.
Our teams have built some strong relationships, both directly with developers and via brokers and other intermediaries such as lawyers, trust companies and other corporate service providers.
Brexit has started to show some impact on UK construction and development, material costs have increased due to the weaker pound and there has also been an increase in lead times for products such as timber and bricks imported from the EU.
The historic heavy reliance on EU labour in the UK construction industry will also be impacted, as these workers leave, the labour demand shortages will lead to an increase in labour costs.
Sancus was prepared for the impact of Brexit on the loan book and has ensured that extra “head room” has been given when reviewing monitoring surveyor reports. There has been some deterioration in loan book performance due to the combination of Brexit and Covid but we have been working closely with Borrowers in these instances.
On another note, I must also announce the departure from Sancus of my colleague, friend and co-founder, John Davey who shall be leaving the company at the end of June. Speaking on behalf of the team and myself, we will miss his presence in the business, his energy, support and humour.
I would like to thank our Co-Funders, work colleagues and friends for their support over the last year as we start on the real road to recovery, I appreciate that we have all had our own individual journeys during this time.
As always, we are available to talk and answer any queries you may have, please email your Relationship Manager in the first instance, our staff contact details can be found here.
1 Nationwide House Price Index
2 HM Revenue & Customs Policy Paper “Extension of the temporary increase to the Stamp Duty …”
3 Policy Exchange – Helping Genation Rent become Generation Buy
4 Office of National Statistics – Unemployment
5 Bank of England “How has Covid affected household savings?”