Just over a decade ago the Mayan calendar had us contemplating the end of days. But, as the 21st day of December 2012 rolled uneventfully into the 22nd, it proved to be nothing more than a Hollywood-fuelled anti-climax.
Skip forward to today and the news notifications that flood our phones give the impression we’re again on the brink of Armageddon, albeit of an economic nature.
But, as I jostled with the crowds in Westquay Southampton last weekend, it seemed the general public hadn’t got the memo.
Similarly, traffic to our commercial finance comparison site has shown no signs of slowing down. If anything, we’re busier than ever.
A difficult economy doesn’t put off every business owner
So, in the face of persistent headlines about ‘rates chaos’ and a ‘mortgage meltdown’, why does the outlook for the commercial market feel cautiously optimistic?
Adaptable investors
The commercial investment market is enjoying a boost thanks in part to the ‘Keep calm and carry on’ mentality of the British investor. As profit in the residential buy-to-let market is squeezed by rising interest rates and a punitive tax approach to interest changes, not to mention regulatory headaches, investors are turning to the commercial world to de-risk and diversify.
Despite 14 consecutive BoE rate rises, most lenders have done a fantastic job of navigating the ups and downs of the swaps markets
There is also a pivot towards semi-commercial. Rates are attractive thanks to soaring demand for residential and, because of permitted development rights, internal conversions even more accessible. A blended approach to property, the benefits of residential yield rises in the past year, plus the long-term security of a full repairing and insuring lease mean lenders too are seeking to add this asset type to their books.
Desensitised general public
The past decade has brought Brexit, a global pandemic, political turmoil and a war on the continent that unleashed the biggest squeeze on people’s disposable incomes in 50 years. As a nation, we’ve been put through the wringer and have collectively reached the mindset of ‘Qué será, será.’
Lenders are hungry for business and there’s no lack of clients to gorge on if they have the appetite to flex criteria and slash rates
There is no denying that the cost of living is causing a squeeze on household incomes that is translating into challenging trading for pubs and restaurants in particular. But there is still a surplus of pounds in our pockets from lockdown days so, to the frustration of the Bank of England (BoE), some of us are still out spending our savings, while many of us are just hooked on consumerism, spending money we don’t have.
Resilient business owners
A glance at our CRM indicates the nation’s business owners are ploughing on despite the negative outlook. We had nearly 400 enquiries for commercial mortgages in September, many from owner-occupiers in a broad range of sectors.
From nail salons to car dealerships to recruiters, business owners have ambitions to own their premises. And application processes show us that balance sheets are broadly healthy despite the reduction in disposable income and the bite of higher costs.
Traffic to our commercial finance comparison site has shown no signs of slowing down. If anything, we’re busier than ever
The gloomy predictions of economists appear to have been tuned out. And, if inflation forecasts are anything to go by, they are usually wrong anyway.
Plus, if we all waited for a period of stability and economic certainty to invest in our business, the economy would grind to a halt. As someone who started his first mortgage business on the eve of the 2008 financial crisis, I can attest that a difficult economy often isn’t enough to put off every business owner. And those who ride out a storm emerge healthier and stronger.
Optimistic lending environment
Lenders are hungry for business and there’s no lack of clients to gorge on if they have the appetite to flex criteria and slash rates. To our delight, many are doing so.
Despite 14 consecutive BoE rate rises, most lenders have done a fantastic job of navigating the ups and downs of the swaps markets. There have been periods of reduced sector appetite and fluctuations in criteria while lenders juggled caseloads, but now they’re slashing minimum loans to take their slice of the pie.
From nail salons to car dealerships to recruiters, business owners have ambitions to own their premises
This is vital to our recovery, particularly when we need to support the SMEs that form the backbone of our economy, which have already withstood an incredible amount of upheaval over the past decade.
The golden trio of a resilient business community, a stubbornly spend-happy general public and a commercial finance market that’s up to the challenge looks set to be a winning formula to disprove the naysayers.
Without wanting to become just another economist making a questionable prediction, I do believe economic Armageddon in the commercial market promises to be just another anti-climax.
Peter Williams is chief executive of Propp.io
This article featured in the October 2023 edition of MS.
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