Investment trends for 2019 – it’s not going to be easy, but some aspects of property investing could still provide attractive returns - says investment specialists BondMason
“2019 is likely to be more gloomy than great for investors,” says Stephen Findlay, the CEO of investment specialists BondMason (www.bondmason.com), “but we expect to see some areas of opportunity, including lending secured against UK property, which should continue to offer attractive options for investors looking for moderate returns with relatively low volatility and good downside protection”.
With tax changes and market uncertainty causing buy-to-let to become less attractive, investing in property isn’t as easy as it once was, yet this asset class can still be made to work well for passive investors.
The backdrop to 2019 is the continuation of gloomy news for many investors from:
- Flat interest rates continuing: whatever the outcome around Brexit, the market is not expecting interest rate rises;
- Equity: shows every indication of continuing a downward trend as the bull run continues to fade; and
- A slowing property market as the drop in London prices reverberates outwards: combined with increased housebuilding increasing supply.
Stephen Findlay adds: “Against the uncertain and gloomy economic backdrop, BondMason expects to see private investors continue to be content with an investment exposure to property, as our research shows people have great trust for investments backed by ‘bricks and mortar’. Indeed, with buy-to-let looking less attractive we expect to see more people accessing returns from property through a variety of approaches such as property trusts and lending platforms.”
Your home and “sweating this asset”
One trend BondMason sees as likely to be very interesting in 2019 is the continued growth in the ways people can use their home as an asset that creates income.
“We expect to see more developments across the whole area of ‘sweating your home as an asset’, with further interesting innovations for investors and home-owners alike.”
This is something that has been building for a while. From one side we have more renting of spare rooms, brought about by disrupters like Airbnb, which has proved popular with families looking to make their main and holiday homes generate more money, and the government’s popular “rent a room” tax allowance. You can now even use Apps to rent your garage to people looking for storage space.
On the financial side, the growth in the sophistication of equity release mortgages is being driven by growing pressures to make better use of the family home’s capital value. Examples include the greater need for the “bank of mum and dad” to help towards house deposits for children, and also the growing number of semi-retired baby-boomer empty-nesters who don’t want to downsize but want access to the large amounts of capital tied up in their house.
Stephen Findlay says: “The family home is still the most valuable asset most people have. Instead of hoping to make money simply by upgrading it and selling at a higher price, we are seeing continued innovation and popularity in new and improved ways to make this asset work harder.
“Now you can easily rent your spare rooms to holidaymakers, your garage to people wanting storage and gain large amounts of capital through equity release mortgages.
“In 2019’s sombre economic climate, we expect even more people will be making use of these existing ways to generate income from their house, and this will itself spur further innovation, particularly financial, with more products allowing people to unlock some of their home’s value while they are still living in it, and at the same time, provide the suppliers of this capital – investors and lenders – a good opportunity for risk-adjusted reutrns .”
Don’t keep all of your wealth in bank accounts
BondMason also expects the increased uncertainty and prospect of lower returns to cause many people to keep money in the bank instead of investments. However, it warns that its research shows that this approach has been disastrous for many savers over the past 10 years.
Stephen Findlay says: “The combination of low interest rates and modest inflation means that putting money in the bank is actually the one investment strategy guaranteed to lose you money in real terms.
“Our research shows that a big problem stems from most people significantly underestimating the way inflation erodes the real value of their savings. For instance, if you had £10,000 in a zero-interest bank account then, over the past three years alone, it will have lost around £650 in value. About half of people interviewed thought the impact was substantially less, with nearly 10% mistakenly thinking inflation had no effect at all.”
Stephen Findlay adds: “This misconception means many people do not realise the extent to which inflation is steadily making them poorer. Even in the good times over the past 10 years, many people have continued to keep a lot of money in the bank through uncertainty and inertia, rather than investing it after the financial crisis, and this has cost them at least £1,920 in real terms for every £10,000 of savings.” [i]
Stephen Findlay added: “My message to the hundreds of thousands of people with unused cash languishing in the bank and unsure what to do with it is to instead to speak to a financial adviser and also do your own research. Otherwise, if you leave it there another few years, you may well find the value of your savings has reduced even further through the hidden effects of inflation.”
How savers have lost out to the double-whammy of low interest rates and rising inflation:
Tim Prizeman / Kewalin Evans, Kelso Consulting (PR advisors to BondMason)
KevE@KelsoPR.com 020 7242 2286
Karen de Silva, Head of Brand Marketing, BondMason
Tel: +44 (0) 1582 802 000
About BondMason www.bondmason.com
Defaqto 5 Star rated: “BondMason Core provides one of the highest quality offerings on the market.”
BondMason is the UK's number one Direct Lending service exclusively for investors, enabling clients to achieve a positive return in every month since 2015. It carefully sources and filters attractive lending opportunities from across the entire UK Direct Lending market.
With access to more of the UK’s Direct Lending market than anyone else, BondMason’s experienced investment team conducts ongoing due diligence on the UK’s Specialist Direct Lenders and P2P platforms and has reviewed over 100 lending partners to date. The team vets every loan using rigorous selection criteria, focusing on asset-backed lending and diversification to seek to minimise risk and achieve attractive risk-adjusted returns.
Capital is at risk. Nothing in this article shall be construed as advice. Please contact your Financial Adviser to determine if Direct Lending is a suitable allocation for your investment portfolio. Please see BondMason’s full disclaimer and terms for details.
[i] Source: BondMason analysis.