Property Investing during the in the COVID-19 Pandemic

In this article, we discuss:

  • Property investing, including raising money and working with uncertainty during tough economic times. 
  • How Crowdfunding can give property investors the power to do deals they otherwise couldn’t.
  • How real estate tokenisation can be a potentially new way that everyday investors can overcome the traditional barriers to enter the property market.

The covid-19 pandemic has wreaked havoc in almost every industry. While at the same time some are thriving as a result. The travel and aviation industries in particular continue to face uncertainties.

No one knew what the covid-19 pandemic would do to the property industry. If you’d said in March 2020 that the property market would experience a boom during the biggest recession in 300 years, that would have been laughable.

It’s possible that the pandemic could impact property in a number of ways, but here are 3 we will focus on.

  • The availability of funds 
  • The interest you are paying
  • The demand and supply dynamics

Raising Funds in the COVID-19 Pandemic

The impact of the pandemic on individuals looking to raise funds in the UK property market has been interesting.  The impact of the pandemic has been disproportionate on society. Although some low-income households in the U.K have run down their savings and increased debts, the average household’s savings have risen since the start of the pandemic. 

We have seen a large decrease in consumer spending brought about by lockdowns which prevented expenditure on non-essential items, limiting demand by about £ 80.5 billion.  

So what does this changing financial landscape mean for the property world? Recently I spoke with John Corey from Property Fortress about interesting future trends. 

In the conversation, we dig deeper into how you can raise funding for property investment in the covid-19 pandemic.  If you are struggling to raise funds, read on.

Crowdfunding

If you are new to property investing, you might not be familiar with the term with the concept and how it can help you. But crowdfunding is becoming a more and more popular property funding-raising approach in the UK. 

Property crowdfunding is the process of raising funds for real estate investment by reaching out to a pool of investors to contribute small amounts of money to the project. This is a viable alternative to traditional finance and pulls small amounts of money from different investors to finance a real estate asset portfolio. 

 Raising funds in the UK is controlled by the Financial Conduct Authority (FCA) 

In fact, it is easier to raise property funds in the UK than in most countries.

Interest rates

Because of the pandemic, the Bank of England has managed to keep the interest rate at 0.1 per cent. However, the outlook of the economy makes future interest rates uncertain. Rising interest rates will make buying and selling houses more difficult while decreasing interest rates will make buying and selling property easier.  An increasing interest rate however has a different impact on real estate investing. 

Availability of funds

Since the start of the pandemic over a quarter of businesses in the UK have been relying on government-backed loans to survive. The Bounceback loan for instance has so far helped 1.6 million small businesses. Ideally, there are limited funds for investing in property. 

Demand/supply – more complicated

 Unlike funds and interest rates, demand and supply dynamics post-pandemic are more complicated. Demand is likely to increase because of pressure from the “wait and see” buyers. 

This high buyer demand is outstripping new supply and helping to push up prices despite the challenging economic backdrop.

The other area of discussion was on the role of real estate tokenization in addressing the challenges of raising property investment funds. 

 

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