We spoke with Uma Rajah, co-founder and chief executive of prime investment platform CapitalRise, to find out more.
Is it still business as normal for the prime sector?
Operationally, the CapitalRise team has been largely unaffected by the UK lockdown. As a tech-based business, we utilise digital processes designed for remote working and from day one have used laptops and cloud storage, to ensure business continuity should we all need to work from home.
As a number of our team work usually work remotely anyway, collaboration tools like Zoom and Slack have also always been a part of our standard tool kit.
Customer behaviour has definitely changed since the lockdown began, but this has been overwhelmingly positive for us. We have seen a significant increase in loan applications and whilst we usually aim to close one transaction a month, over the last six weeks we have closed and funded three.
This has also highlighted a significant increase in investor appetite, with CapitalRise members funding million-pound deals in just a few hours. Our latest raise was our fastest ever, with investors reserving more than £2 million in just over two hours.
Was this market always more remote-based anyway, which has made adaptation easier?
On the investment side of our business, we have always operated a seamless, digital customer experience, backed by our investor relations team being on hand both on and offline to provide support.
We have customers based all over the UK, so have always embraced technology to streamline the way we engage with them, hosting regular webinars over live events to enable us to widen our reach outside of London.
Whilst from a lending perspective, prime property has long been a very traditional market, our business has introduced tech-enabled processes at all stages.
We build and maintain strong professional relationships with our borrowers and usually meet with them multiple times when securing a loan, whether to discuss the financials or visit a development site. This has obviously been affected by the current lockdown, but we have quickly adapted to regular virtual meetings and have been able to provide support remotely where necessary.
How are developments and investments going ahead with social distancing and lockdown measures in place?
We provide three different types of loans to assist prime property developers at the acquisition, development or sales period stage of their projects. We currently have ten live development loans and these sites remain open, with works progressing in line with hygiene and social distancing rules.
Access to materials and labour and the impact of social distancing rules are impacting the pace of progress, but as all our investment opportunities are structured to accommodate large delays (of one year or more), cost increases or drops in valuation (typically headroom of 37% loan to value ratio or more), we don’t forecast any of the current Covid-19 impacts will affect our investors.
Is the top end of the market immune from the inevitable economic decline not just here in the UK, but all over the world?
The prime property market is not immune from the pressures that will likely affect the whole of the property market, but we expect it to be far less impacted than other parts of the market and expect it to recover much faster.
In the UK, there is strong evidence to show that the prime central London (PCL) property market is more resilient than the wider UK market.
Savills data shows that PCL has bounced back faster and stronger than the UK market as a whole following downturns over the last 50 years - and recent analysis shows that PCL property was in a strong position going into the lockdown, following the so-called ‘Boris Bounce’.
Before lockdown began, the UK saw a 30% increase in £1 million sales across PCL in the first 11 weeks of 2020, compared with the same period in 2019. Plus, in the three months to mid-March, prices rose by 2.0% across prime London, pushing annual price movements into positive territory for first time in four years.
Would a stamp duty holiday help? And will the extra 2% surcharge on overseas investors, set for April next year, have any impact on PCL?
A stamp duty holiday would help significantly. It would immediately reactivate the market as buyers would want to take advantage of this temporary reprieve and this increase in buyers and transaction levels would restart this critical engine of the economy.
This will have a material effect on the huge number of other industries which rely on the housing market such as construction, surveyors, lawyers, etc.
The extra 2% surcharge on overseas investors set to come into effect in April next year is a completely misguided policy which is going to raise very little money yet makes Britain appear to be discouraging foreign investors from investing and coming to live in this country; at exactly the time when we need overseas buyers and an influx of capital the most – as we are negotiating Brexit and dealing with the aftermath of the coronavirus.