Timing Is Everything

by | May 31, 2020

Timing is everything. Since the re-opening of the property market 2 weeks ago, online property activity has risen by 88% according to market-leading portal Zoopla. It also claims that the bounce-back has actually surpassed pre-lockdown levels due to the glut of deals put on hold and property chains disrupted. Add to that the stock market roaring back to life, retail outlets tentatively opening soon and most people expected to return to work in several weeks…there seems to be an overwhelming sense of relief in the air.

That said, my guess is this flood of deal activity is likely to be short-lived and whilst a general optimism will continue to grow, I think, for the next couple of months, I have concerns about how long it will last and what happens when it runs out perhaps in Q 3 or Q 4 when the numbers of reality set in.

I hope I’m wrong, but we need to consider the possibilities.

If the worst happens there will be a knock-on effect across the market – fewer workers means less spending. With regards to the housing market, we’ve seen predictions of a drop ranging from anywhere between 5% to 14%+ with recovery periods from a few months to over a year. That may indeed happen, and we are careful when we underwrite deals to factor these outcomes into our deal valuations.

But I’m a bit of an optimist here. The economic issues we’re experiencing right now are the cause of a virus, not of any financial breakdowns as led up to the 2008/9 crises – in fact, the pre C-19 economy was in good shape. Right now, this is and has not been about liquidity. The two fundamental drivers still remain in place: the structural supply-demand imbalance across the country, which isn’t going to change overnight, and the large addressable market in funding.

Buying property is not just a financial transaction, it’s a lifestyle changer– people need and want homes and no lockdown or recession is going to change that. 

Better living and better lifestyle should be the wave we follow.

At Hilltop we see a lot of opportunity across the remainder of this year and we continue to see a significant upturn of demand for property development finance from established, quality developers working on attractive projects. That’s demand for both debt and equity. 

While timing is everything, in the human experience you never pick the exact right moment, but I do think right now is a good time to be moving forward again.

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