Peer-to-peer property lending is increasingly appealing in the buy-to-let (BTL) market as changing regulations make it more difficult to start out as a BTL investor.

For many people, and for many years, property has been seen as a first-choice way to invest for the future, with short-term yields from renting it out and capital gains to be made when it comes to selling property too.

But one significant benefit – the ability to offset BTL mortgage interest against any profits made – is now being phased out, and it’s leading some property investors to look away from the traditional lending market and consider P2P property lending instead.

What is P2P property investment?

By definition, peer-to-peer lending involves two parties – the borrower and the lender, who is a ‘peer’ rather than a financial services institution or credit union.

You can become a P2P property investor with less than £1,000, by choosing a platform that allows you to offer smaller loans such as short-term bridging loans for property development projects.

There’s a balance of risk and return, but interest rates can reach into double figures on an annual basis, and as the investor you are not ultimately responsible for the running of the property, including any management fees, running repairs and tenancy void periods.

It’s not without its risks, but with some due diligence and careful consideration of the level of risk you are exposed to, P2P property lending can have big potential as part of a balanced and diverse portfolio.

Types of P2P property investment

There are a few main types of P2P property lending, one of which we’ve already mentioned above:

  • Bridging loans provide finance on a short-term basis to help developers and homeowners span a short gap in the funds they have available to complete their project. It’s usually a faster way for the borrower to obtain funds and if all goes well, a faster rate of return for the lender too.
  • IFISAs, or ‘Innovative Finance ISAs’, are a fairly recent introduction that extends the tax-free benefits of an ISA to P2P lending. Awareness is still low even among experienced investors, who could be missing out on low volatility and higher returns of around five percentage points more than a cash ISA.
  • Pension schemes can also put funds into P2P property lending, for example via a Self Invested Personal Pension (SIPP). There are rules that may restrict your activities somewhat, as with all pension schemes, but your investment will benefit from the tax advantages of a pension too.

As always if investing via a pension scheme, or making a non-pension investment for the purposes of retirement planning, be sure to factor in the likely risk and return not only in the present, but in the last few years before you retire and start to live off the value of your investments too.

Five things to think about

When planning to invest in P2P property lending, there are a few important points to consider before you ever put any of your own money at risk.

Here are five top tips for P2P property investment to help reduce your risk and give you more confidence in your portfolio…

  1. Due diligence

Make sure you do your own due diligence, but also that the P2P lending platform you choose are rigorous in their research too.

Ideally you should invest through a platform that fully researches crowdfunding campaigns before allowing them to launch – and makes that information available to you to guide your investments.

This can help you to identify the best opportunities, such as those where planning permission has already been granted, and to act at a time when the market is gaining strength and value.

  1. Security

Is your investment secured? Your chosen platform may hold a reserve fund in order to be able to compensate investors if a deal falls through.

Alternatively, the platform may take out a second charge against the property involved in the loan, allowing you to regain lost funds by selling the property if necessary.

It’s important to remember that P2P lending is not covered by the Financial Services Compensation Scheme – so if the borrower goes bust, your money is very much at risk.

  1. Updates

You might not want to micromanage the projects you invest in, but it’s good to get regular updates about how well they are proceeding.

This is especially true of larger projects, where there may be more things that can go wrong or delay completion and delivery of the finished properties.

You may not be the only investor on a particular project – so make sure you also get updates about anyone else who is owed money and whether you will be paid before or after them.

  1. LTV ratios

Like on a conventional mortgage, the loan to value ratio (or LTV ratio) is a measure of the value of the loan as a percentage of the market value of the property.

For example, on a £100,000 property, a loan of £90,000 would have an LTV ratio of 90% and the remaining £10,000 is typically placed by the borrower as a deposit.

But for investors, the LTV ratio is a measure of how much undervalued you could sell the property and still recover your funds.

So if you are forced to offload a repossessed asset in a hurry at 80% of its value, you would break even on an 80% LTV loan, but lose 10% of the total value on a 90% LTV loan, and so on.

It’s always worth checking the LTV ratio when making an investment, as it can have a direct impact on the level of risk you face and the potential for losses.

  1. Start small

As mentioned above, it’s quite possible to make relatively small investments via some P2P property lending platforms.

This is a good way to test the waters of P2P property investing – allowing you to find the kinds of opportunities that work best for you.

You can then build up to larger individual investments or a diverse selection of different smaller investments that give you balance and insulation from isolated risks.

With BTL mortgage interest relief due to phase out over the coming months, it’s the perfect time to try out this innovative and very modern market, so you’re ready to place funds into the more lucrative P2P property investments that could arise over the next year or more.

https://www.propertyinvestortoday.co.uk/breaking-news/2019/6/the-growing-appeal-of-peer-to-peer-property-lending?source=newsticker

Disclaimer: The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

As the world celebrated the 50th anniversary of the Apollo 11 moon landings this summer, many people – including investors – looked to the night skies and wondered when we will return to our natural satellite.

Space exploration is becoming increasingly privatised, with companies like SpaceX ploughing vast resources into researching the next generation of reusable space vehicles since NASA retired its space shuttle fleet.

Part of the motivation behind private space exploration is of course the possibility to profit from resources found out in space, where ownership rights may be easier to obtain and activities, while clearly challenging, are as yet not tightly regulated.

So any report of a potentially valuable commodity found on the moon always makes headlines – and this summer was no exception.

Water on the moon

Water on the moon is a significant discovery, although not because of the reasons you might expect.

The earliest detection of water on the moon may have been during the Apollo missions themselves, when trace amounts of water were detected in the samples of moon rock brought back by astronauts.

However, because the containers used to transport the samples were not completely watertight, it was decided that the water may have got into the samples after their return to Earth.

In 2009 NASA’s Lunar Reconnaissance Orbiter made measurements that showed the presence of about 32 ounces of water per ton of the lunar surface.

And as recently as 2018, NASA went on to confirm the presence of frozen water within the top few millimetres of the moon’s surface around its poles.

This all matters not as you might expect, to provide drinking water for a human colony on the moon, but because it could be possible to extract the hydrogen and oxygen for use in rocket fuel, making the moon a waypoint for longer journeys across the solar system.

But the summer of 2019 brought an even more exciting discovery for would-be space investors – and a more traditional commodity for them to potentially mine on the moon.

Metal on the moon?

In June, researchers from Baylor University reported their discovery of a “mass anomaly” beneath the largest crater on the moon, close to its south pole.

The oval-shaped South Pole-Aitken Basin reaches around 2,000 km wide and several miles deep, but cannot be seen with the naked eye as it is on the ‘dark side’ of the moon, which continually faces away from Earth.

By analysing minor variations in the strength of the moon’s gravity, researchers were able to create a map of the moon’s mass – and what they found at the South Pole-Aitken Basin came as a surprise.

The measurements showed an unexpected mass buried hundreds of miles deep and pulling the basin itself down by as much as half a mile.

Lead author on the research paper Dr Peter B James explained: “Imagine taking a pile of metal five times larger than the Big Island of Hawaii and burying it underground. That’s roughly how much unexpected mass we detected.”

The theory is that the large asteroid that created the crater when it collided with the moon may have slammed its iron-nickel core into the lunar surface, leaving vast metal deposits embedded throughout the moon’s upper mantle in that area.

The Holy GRAIL

The data used for the research came, appropriately enough, from NASA’s Gravity Recovery and Interior Laboratory (GRAIL) mission and could be seen as something of a Holy Grail by would-be lunar investors too.

While it would of course be difficult to mine metal from hundreds of miles below the moon’s surface, and out of sight of Earth, the potential for investors is clear too.

The moon offers several advantages – it’s relatively close, we’ve been there before and it’s locked in a stable orbit – that remove the biggest challenges of mining comets or asteroids as they hurtle through space past Earth.

With a seemingly vast deposit of metal to extract, mining operations could be established on a long-term basis, with permanent or semi-permanent residences constructed on the moon’s surface.

Significantly, following on from the discovery of water ice near the poles as well, the findings are an indication that the moon and other bodies in our solar system still have secrets to discover that could yield unfathomable return on investment for the private companies that win this 21st century space race.

https://www.baylor.edu/mediacommunications/news.php?action=story&story=210457

https://sservi.nasa.gov/articles/its-official-water-found-on-the-moon/

https://www.space.com/41554-water-ice-moon-surface-confirmed.html

Disclaimer: The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

We all make mistakes from time to time, whether it’s withdrawing from an investment just before it takes off, or leaving funds in place for too long during a downturn.

And with more and more ways to dabble in stocks, shares, commodities and cryptocurrencies, the potential for error is greater than ever.

But while nobody’s perfect, there are a few bad habits you can watch out for and try to avoid, which should help you to keep more value in your investments and put more profit into your portfolio.

Here are some of the perils and pitfalls of DIY investing to watch out for when managing your own funds in the future.

1. Buying British

There’s nothing wrong with a bit of patriotism and the FTSE 100 is probably the first brush with stocks and shares that most British DIY investors have in their life, but solely buying British limits your access to emerging markets where some of the highest growth can be found.

It’s worth remembering though that some brands headquartered in Britain do have access to multinational economies – including in the major industries like energy and petrochemicals – so by looking to these you can help to spread your investment over multiple jurisdictions.

While this won’t shield you from a global downturn, it can help to level out any shocks in individual economies, for example relatively isolated political upheavals like the Brexit and Scottish independence referendums.

2. Only Equities

Again, keeping to only one asset class limits your options, so look beyond the obvious stocks and shares to classes including bonds, commodities, precious metals and property.

Multi-asset funds, investment trusts and exchange traded funds (ETFs) are all good ways to expand your access without too much extra complexity in your portfolio, so look for a DIY trading platform that allows you to buy into these if you’re interested in trying them.

Again these kinds of investment vehicles can spread your funds over several different industries or economies, so even with a relatively small DIY portfolio, you can get the kind of access that was historically only achievable with much larger investments.

3. Too Many Transactions

Transactions typically mean transaction fees, and when you’re trying to maximise your profits, that can soon start to eat into your overall portfolio value.

Remember that each transaction fee takes away from the amount you earn through capital gains, dividends and interest.

Good investment is usually a long-term process, putting money you don’t immediately need into a vehicle that will outpace the rate of inflation plus any transaction fees, so that it is eventually worth more in real-terms value.

4. Slump Selling

A long-term investment strategy gives you the ability to weather medium-term downturns, so don’t be panicked into selling up your portfolio when a slump hits.

This is a hallmark of amateur investing and can leave many do-it-yourselfers substantially out of pocket by selling off their stocks and shares just after they have lost a significant percentage of their value.

In many cases – although obviously not always – equities and commodities will regain their value given long enough, so hold your nerve and wait for the recovery before you sell them at a higher value.

Remember you should never invest money that you absolutely cannot afford to lose, because there are very few investments that offer a guaranteed rate of return with zero risks.

5. Peer Pressure

Don’t buy into something just because it is recommended to you. Every investment should be judged on its own merits and an honest assessment of the risk level attached.

As your career as a DIY investor proceeds, you’re bound to be presented with a ‘sure bet’ from time to time by well-meaning friends and family, or by fellow investors at networking events.

You might even find yourself on the receiving end of an investment pitch by a brand or company looking to raise funds, but you’re not obliged to give them your money.

Too many DIY investors are easily persuaded by an emotional pitch or the promise of low-risk, high-reward – so keep an open mind, do your due diligence and avoid anything that looks too good to be true.

6. The Bigger Picture

An added issue with investing in opportunities that are recommended to you is whether or not they are a good fit for your portfolio as a whole.

Instead of only thinking about each investment in isolation, consider how well it fills a gap in your portfolio or how well it balances the other investments you already hold.

You might see a juicy prospect but realise it exposes you too much to one emerging economy, for example, or that too large a percentage of your funds would then be in a single industry or sector.

This doesn’t mean you have to reject the lucrative opportunity in front of you, but it could require you to rebalance elsewhere in your portfolio by selling some of your other assets.

7. Diversify

The running thread through much of the above is diversification, and this is worth mentioning again in its own right.

Even a small investment portfolio can diversify by buying into ETFs and multi-asset funds, or simply through some careful balancing of different equities.

If you’re relying on your investments to derive an income in the future – such as a retirement fund, for instance – diversification is a good way to reduce the risk of any one asset failing to perform.

Combined with a long-term strategy that extracts value at the highest point in the cycle, instead of offloading assets when they are at their weakest, this gives you some of the best chance of seeing ongoing growth in your total portfolio value.

Ultimately that is the aim of DIY investing and over time, you should learn to make these habits second nature so that you barely even need to think about them when reinvesting profits or dealing with a downturn in the future.

https://www.thisismoney.co.uk/money/diyinvesting/article-7170163/The-7-bad-financial-habits-DIY-investors-break.html

Disclaimer: The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

A new BBC podcast looks at the story behind the OneCoin cryptocurrency and the £4 billion investors poured into it before its co-founder Dr Ruja Ignatova disappeared in 2017.

The cryptocurrency is now considered to have been a Ponzi scheme scam and Jamie Bartlett’s ‘The Missing Cryptoqueen’ looks at how Dr Ruja, as she was commonly known, was able to entice investors to put in such vast sums before simply vanishing.

Dr Ruja hosted glitzy launch events to sell the concept of OneCoin, including at Wembley Arena in London in 2016, just a year before her disappearance.

Her events featured energetic walk-on music before Dr Ruja would present to the excited audience about how OneCoin would soon be worth more than Bitcoin and how other start-up cryptos were attempting to copy it.

But in early 2017, the OneCoin trading platform closed without notice, leaving investors unable to withdraw their funds from the currency.

What just happened?

OneCoin was structured as a Ponzi or pyramid scheme, with the promise of greater benefits to those investors who bought higher-value packages, some valued in the hundreds of thousands of euros.

As early as 2015, Bulgaria – where two of OneCoin’s mining servers were located – warned of the risks of cryptos specifically including OneCoin.

After that, the cryptocurrency ceased activity in Bulgaria, switching to foreign banks to process wire transfers when investors wanted to withdraw funds.

Extracting income from OneCoin was relatively difficult too – the only way to do so was via OneCoin Exchange, and was only possible for investors who purchased above the basic starter level.

Strict limits meant only a certain number of OneCoins could be converted into euros per day, again depending on the level of investment, after which a wire transfer could be requested.

At the start of 2017 the exchange shut down without warning, leaving no other way for OneCoins to be redeemed for currency that can be withdrawn or transferred to a conventional bank account.

Where is Dr Ruja?

Even after 2015, Dr Ruja continued touring the world and promoting OneCoin to investors in a total of 175 different countries, according to the BBC podcast.

In 2016, a six-month global tour brought in much of the total investment made into OneCoin, with about £26 million paid in by investors in the UK at that time – and potentially close to £100 million invested by Brits over the lifetime of OneCoin.

The scam covered the full range from rich to poor, with substantial investment from China, Hong Kong, Germany and South Korea, as well as Bangladesh, Uganda and Vietnam.

As of 2019, Dr Ruja Ignatova was charged by the US Department of Justice with money laundering, and the authorities there branded OneCoin a simple pyramid scheme fraud.

Does blockchain have a future?

The anonymity of cryptocurrencies has made them hugely popular in their early years, but it also lends itself to scams of this nature.

That raises the question of whether cryptos have a future and especially whether the blockchain technology that powers them will remain popular in the years ahead.

For now it seems likely that the benefits of blockchain will continue to be appreciated more than the risks, and there are reports on a daily basis of new applications for the tech – such as our own recent report on IBM’s blockchain-powered platform for more ethical cobalt mining.

Risk-averse investors might not appreciate the huge volatility that has been seen in crypto valuations, but for those prepared to gamble, there have certainly been substantial gains to be made over the past decade or so.

And as cryptos continue to mature, they are finding favour with household digital brand names like Facebook, which is working with regulators to launch its own crypto, Libra, with the governments of the countries in which it launches brought on-side from the start.

What about OneCoin?

Legal challenges to OneCoin continue since the disappearance of Dr Ruja, with nearly 100 people prosecuted in China alone, where 1.7 billion yuan of funds have been recovered.

The BBC reports that the company behind OneCoin still argues that it “verifiably fulfils all criteria of the definition of a cryptocurrency”.

The company also told the broadcaster that The Missing Cryptoqueen “will not present any truthful information and cannot be considered objective, nor unbiased”.

“Our partners, our customers and our lawyers are fighting successfully against this action around the globe and we are sure that the vision of a new system on the basis of a ‘financial revolution’ will be established,” it added.

However for those investors unable to withdraw funds from the scheme – and instead left holding a balance of virtual OneCoins with no real-world value – the ‘financial revolution’ may feel as intangible as the currency around which it is based.

https://www.bbc.co.uk/news/technology-49826161

https://www.bbc.co.uk/programmes/p07nkd84/episodes/downloads

Disclaimer: The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

While blockchain technology is being used to underpin innovations like cryptocurrencies, IBM are looking to it as a way to support ethical cobalt mining and reduce the “collateral damage” caused to the environment in places like the Democratic Republic of Congo.

In a post on Big Blue’s blog earlier this year, IBM Industries content producer Jordan Teicher explained how mining operations have become a blight on the landscape and are associated with unsafe levels of cobalt in the local drinking water.

He cited the research of Benoit Nemery, professor of toxicology at K.U. Leuven university in Belgium, who has investigated the damage done by mining in the DRC’s ‘copper-cobalt belt’.

The professor has visited the area each year since 2006 and describes it as “chaotic, very dirty and very obviously polluted”, with conditions significantly worsening after cobalt ore was found there ahead of his trip in 2014.

The Congo cobalt rush

The discovery of cobalt’s ore, heterogenite, brought a rush of would-be miners to the working class neighbourhood of Kasulo in Kolwezi.

These prospectors, locally known as creuseurs, went to work with picks and shovels to extract the ore by hand – a scene Professor Nemery described as “spectacular and tragic”.

He told IBM: “I have pictures where you can see everything had been turned over. There were pits 20 metres deep and a lot of rubble everywhere, and children playing around in it. Some people were keeping the minerals in their own homes.”

Cobalt exposure can be harmful to the organs of the body, including the skin, lungs, heart and eyes, and long-term exposure is also linked with an increased risk of cancer.

Over the course of 2014-15, Professor Nemery worked with colleagues to survey the biological condition of creuseurs, local residents and children in Kasulo.

The findings, published in the September 2018 edition of Nature Sustainability, reported some of the highest urine concentrations of cobalt and other trace metals the team had ever seen.

Why is cobalt important?

Cobalt is used in lithium ion batteries, among other electronics applications, alloys and catalysts.

Importantly, lithium ion batteries are used in electric vehicles – so as the automotive sector looks to go green, demand for cobalt is set to rise in the years to come.

This led to a surge in cobalt prices in early 2018 as investors anticipated a level of demand that as yet has not emerged, and this led to a peak value of around $95,000 per tonne before cobalt prices crashed by 70% of their value.

Ironically, the cobalt rush in the DRC was partly responsible for this, as the combined output of the creuseurs flooded the market with more cobalt than was needed.

The DRC remains the biggest supplier of cobalt on the planet, responsible for well over half of the total annual cobalt production in recent years.

As a result, cobalt prices may currently be substantially lower than their long-term market value, particularly when the rising demand for electric vehicles is factored into their outlook.

A Morgan Stanley report cited in the IBM blog post indicates that demand for cobalt will rise eightfold by the second half of the 2020s.

How to prove cobalt is safe

For investors keen to support electric vehicles as part of a sustainable responsible investment (SRI) portfolio, cobalt poses a dilemma.

It’s essential for the lithium ion batteries EVs run on, but it’s impossible to trace the original source of cobalt once it is smelted together to create the metal in bulk.

With the environmental and public health implications raised by the heterogenite mining activities of the creuseurs in Kasulo, how can investors feel confident that their portfolio adheres to the principle of ‘first, do no harm’?

IBM have entered into a consortium with LG Chem, RCS Global and Ford to create a blockchain-powered way to reliably trace cobalt all the way back to its point of extraction.

The pilot scheme aims to provide the necessary paper trail from the original cobalt mine right through to the final manufacturer to allow materials within the cobalt supply chain to be produced, processed and traded responsibly.

How does blockchain help?

Blockchain by its very nature is suited to improving traceability in supply chains, and in the pilot scheme, it is used to track the progress of cobalt from the DRC, to South Korea where LG Chem’s cathode and battery plant is based, to the USA where Ford incorporate it into EVs.

All of this takes place on the IBM Blockchain Platform, powered by Hyperledger Fabric from the Linux Foundation, giving real-time visibility to all network participants with the necessary permissions.

Max Nelson, a global business development executive for industrial products at IBM Global Markets, said in the blog post: “We’re organised across 12 different industries so we have the industry knowledge and leadership to bring this together. That’s how we’ve been successful in bringing in participants across the supply chain.”

The pilot scheme is focused on Ford but Mr Nelson added that upon its completion, IBM believe they will be able to encourage OEMs, defence and aerospace companies to join the platform.

And while the programme has so far only included large-scale miners in the DRC, the aim is to expand it to include creuseurs and similar small-scale and individual prospectors.

He explained: “The broader purpose of the network is to make a true positive social impact and help address the root causes of the challenges faced by the artisanal miners.”

This is good news for ethical investors keen to maintain an SRI portfolio with access to the EV market in developed countries including the US, without causing environmental harm in economies like the DRC.

https://www.ibm.com/blogs/industries/blockchain-cobalt/

Disclaimer: The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

The National Landlords Association has warned of the ‘devastating’ economic impact of Section 21 abolition on the private rented sector (PRS).

A report compiled by Capital Economics on behalf of the NLA predicts a fall in private rented properties of nearly a million premises, with 770,000 fewer rental homes available to tenants on Universal Credit or housing benefits.

This represents a decrease in the total size of the PRS of around 20%, and of nearly 60% for housing benefits and Universal Credit claimants.

Chris Norris, director of policy and practice at the NLA, said: “The government has clearly failed to recognise the realities of the private rented sector by proposing the abolition of Section 21.”

What is Section 21?

During World War I, a shortage of rented accommodation led to the introduction of security of tenure for some tenants in 1915.

This was reinforced in 1977 by that year’s Rent Act and Protection from Eviction Act, which prohibit eviction unless one or more of the conditions of Schedule 15 is met.

While rental arrears are one such condition for eviction, they are discretionary, meaning a court must rule on whether it is reasonable to evict the tenant for non-payment or late payment of rent.

However under the Housing Act 1988, which introduced assured tenancies and assured shorthold tenancies, Section 21 permits eviction without reason – and without fault or blame – as long as tenants are given sufficient notice.

As part of the government’s ongoing reforms of the PRS, the abolition of Section 21 has been proposed, which the NLA claims would lead many landlords to reduce their property portfolio or leave the market completely.

Economic impact of Section 21 abolition

The NLA’s report predicts some staggering figures in its forecast of the economic impact of Section 21 abolition:

  • A 20% decrease in private rented housing stock (960,000 fewer dwellings).
  • A 59% decrease in private rented dwellings for UC and housing benefit claimants (770,000 fewer dwellings).
  • An increase in rents for 13% of private rented properties (600,000 dwellings).

Even if Section 8 evictions are made easier, faster and cheaper to take through the necessary court process, the NLA still predicts impacts around one to two fifths the scale of those mentioned above:

  • 180,000-390,000 fewer private rented properties.
  • 130,000-300,000 fewer properties for benefits claimants.
  • 110,000-240,000 properties to see rent increases.

“Any government which thinks it appropriate to risk the loss of nearly one million rental homes at a time of housing crisis needs to reassess its priorities as a matter of urgency,” said Mr Norris.

“Rather than playing to the gallery, the government should be looking to support and incentivise good landlords to remain active and provide homes to those who need them, rather than making it harder and causing these landlords to exit the market.”

Treacherous times for property investment

The potential abolition of Section 21 continues a trend of changes made to legislation that impacts on property investment in the guise of protecting tenants, but at the cost of landlords.

Previous changes include the government’s crackdown on letting fees. Guidance for this was published on April 3rd 2019, with the ban coming into force just two months later, leaving many landlords hurrying to catch up with the new rules.

The NLA says that the effects may already have started to emerge. In 2017, the number of private rented dwellings in England fell – for the first time since 1999 – by 46,000.

Its own research found “a significant proportion” of private rental landlords would reduce or completely liquidate their property portfolio if Section 21 were abolished, while the rest would be likely to choose their tenants much more carefully.

Wider economic impacts on property investment

Of course there are broad questions surrounding the current and short-term future economic impacts on property investment, particularly around inflation, interest rates and house prices during and after the conclusion of Brexit.

Following the Brexit delay on March 29th 2019, the NLA predicted the Bank of England base rate would be likely to remain at or near to 0.75%.

Once Brexit is ‘resolved’, inflation may rise above its long-term 2.0% target, triggering an increase in the base rate to 1.0% in 2020 and 1.5% in 2021.

As a consequence, mortgage interest rates could rise to reach around 2.8% in late 2021, adding to the cost of investing in property for buy-to-let investors.

Meanwhile over the same period, the NLA estimates house prices will rise by no more than 3.5% each year to 2021 in any region, and are likely to post around 1.0% in 2019 and 2.0% over the following two years.

It’s a fine balance, especially when factoring in the volatility of Brexit uncertainty, and it remains unclear whether the coming 2-3 years are likely to see net capital gains on rental property resale prices or net losses.

Short-term impacts on rental property yields

For those who choose to remain in the PRS in the immediate future, Section 21 abolition is just one of a number of forces driving rental yields higher.

The NLA notes that weaker supply places upward pressure on rents, which is compounded by other influencing factors:

  • Higher wages allowing more young adults to leave their parents’ home.
  • Lower support for property ownership as mortgage rates rise in the next few years.
  • Ongoing recovery in the London market tightening rental conditions.

“Overall, we think rents will rise by an average of 1% during 2019, before accelerating to 2% in 2020 and possibly to 3% in 2021,” the NLA’s report states.

“However, rising rents will bring limited comfort for investors. With house price increases expected to remain subdued over the next two years and mortgage costs rising, any increase in returns will be modest.

“With no turnaround in sight, this suggests that the sell-off in buy-to-let may extend into the longer term.”

https://landlords.org.uk/news-campaigns/news/economic-analysis-shows-abolition-section-21-would-devastate-prs

Disclaimer: The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

UK tech investment continues to set a blistering pace in 2019, according to reports from Tech Nation.

The UK-based network for technology entrepreneurs published a landmark study in the summer that showed the UK ranks third behind only the US and China for the number of tech ‘unicorns’ created.

These are new tech start-ups that quickly reach a valuation of $1 billion or more – and used to be as rare as their mythical namesake.

However, they are increasingly common, with London ranking second in the world for the total number of fintech unicorns created, 18, and only the Bay Area scoring more.

As of London Tech Week this summer, the UK had a total of 72 unicorn companies, with 13 new ones added to that list over the preceding 12 months.

Over a third of the fastest growing technology firms in Europe are now based in the UK, and its third-place position worldwide is not adjusted for population or GDP compared with the vast resources of the US and China.

More than a fifth of Europe’s unicorn firms are based in London alone, equivalent to 45 firms with a combined value of almost $150 billion.

A European and global leader

The $35 billion invested in venture capital in the UK in the five years from 2013 to 2018 places it “emphatically” ahead of the rest of Europe, according to the report.

In 2019 this total looks to rise considerably, with a record-breaking six-month total of $5 billion of venture capital investment in the first half of the year alone.

Firms tipped for future unicorn status are those with a current value in excess of $250 million; of these there are 75 in the UK, nearly a third of all Europe’s future unicorns.

Since 2012, the UK has created as many unicorn firms as Germany, Israel, Sweden and the Netherlands added together, and that pace is quickening.

Four out of five of Europe’s ‘unicorn hunters’ – venture capital funds with a focus on unicorns – are based in the UK, a sign of the investment appetite for these fast-growing firms.

Responsibility among unicorns

The UK is favoured for its reliable responsibility regulations and for the support it shows to fledgling tech firms as they are getting off the ground and growing quickly in valuation.

According to the OECD, the UK achieves the highest total score for the quality of the country’s regulatory practices.

The Financial Conduct Authority provides initiatives like the FCA ‘regulatory sandbox’ which allows innovative firms to succeed in their early days.

And the Centre for Data Ethics and Innovation helps to increase the benefits derived from new data-enabled technology.

All of this is not just achieved by rearranging the furniture; a combination of private sector and public sector initiatives supported by the government have put £14 billion of capital into delivering on these ambitions.

The goal is to support rapid growth and innovation, but to balance this with the regulatory responsibility and ethics that are needed to ensure that innovation does no harm.

Unicorns are everywhere

The UK’s unicorns are found nationwide, and although London is a clear leader, there are multiple unicorn firms to be found in Bristol, Oxford, Cambridge, Leeds, Manchester and Edinburgh too.

They also span a wide range of different sectors, including industrial, healthcare, retail and financial technology or fintech.

Well over two million people are now employed in the UK tech sector, which is growing nationwide at a rate of over 10% a year.

Tech Nation’s report in the summer listed Belfast, Birmingham, Leeds, Manchester and Reading as all having seen some of the strongest growth in job opportunities in the sector.

Employment is not all directly tech-related – although there are naturally opportunities for skilled individuals in tech roles – but also includes support roles in non-tech disciplines like accounts, legal, marketing and sales.

A focus on AI

One major topic within tech innovation is that of artificial intelligence or AI, seen as a solution to some of the world’s most complicated challenges.

In a separate Tech Nation report, the UK was again ranked third overall in terms of investment raised for AI innovation.

However in terms of the number of AI firms already operating in the first half of 2019, it ranked second – again a sign of the country’s mature and still-growing innovation sectors.

Some of the main challenges being tackled by UK AI innovators include cancer diagnosis, climate change and identifying so-called ‘fake news’ reports.

A record year

Again, the first half of 2019 saw record investment into these AI innovators, with just more than $1 billion of AI investment recorded during the first six months.

This just pipped the 12-month total for 2018 by around $41.5 million, again putting the UK behind only the US and China in terms of gross total investment into AI.

Between 2014 and 2018, total investment into AI grew roughly six-fold, and firms in the UK raised nearly twice as much as their counterparts in the rest of Europe combined.

The UK is also unusual in that its AI sector employment is dominated by start-ups and small firms, accounting for 89% of the sector working for companies with under 50 employees.

By comparison, China’s AI sector consists in the majority of larger firms, with 53% employing more than 50 people.

This represents one of the future challenges for the UK AI sector and particularly for investors in the sector – ensuring that unicorns are not the only activity, but that once established, they are able to continue to grow to become larger, mature companies with a larger workforce.

‘A race to scale’

The figures were published as Tech Nation announced the 29 companies given a place on the first Applied AI growth programme.

Among them, 35% were located outside of London including cities in Scotland and Wales; 45% had at least one female founder or co-founder; and 24% were led by a female CEO.

One such firm is Dream Agility, based in Manchester, whose CEO Elizabeth Clark explained the importance of supporting growing AI innovators and of collaboration between those operating within the sector – arguably one of the strengths of having a larger number of smaller firms in the UK.

She said: “We’re delighted to have made it on to the Applied AI scheme. It’s the first of its kind and to have a peer group of people with their own proprietary AI in such a fast-moving sector is phenomenal.

“There’s a lot to be gained by learning from each other’s successes and failures, as well as being able to leverage each other’s networks. It’s a race to scale, and having a scheme that will support us in doing that is a gift.”

https://technation.io/wp-content/uploads/2019/06/UK%E2%80%99s-digital-tech-sector-has-created-one-tech-%E2%80%98unicorn%E2%80%99-a-month-for-last-year.pdf

https://technation.io/wp-content/uploads/2019/09/UK-ARTIFICIAL-INTELLIGENCE-INVESTMENT-REACHES-RECORD-LEVELS.pdf

Disclaimer: The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.