Kuflink sees silver linings amidst property storm clouds
Property prices are falling, as the UK enters into an economic recession. Rising interest rates, supply chain issues and a cost-of-living crisis have inspired countless articles and think pieces about the imminent collapse of the housing market. But behind the headlines, property market experts are not exactly panicking.
In fact, Paul Auger, head of products at Kuflink, believes that there are some silver linings to be found in the emerging property market storm, and the property lending platform is ready to take advantage of these opportunities, while continuing to minimise the risks to investors and borrowers.
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“Along with the general market chatter, we believe there will be a softening and correction of property prices over the next 18 months or so,” Auger suggests.
“But unlike previous corrections in property prices, unemployment is relatively low as in previous times when rising interest rates were also mirrored by rising unemployment.”
In anticipation of this softening market, Kuflink’s leadership team meets following each meeting of the Bank of England’s Monetary Policy Committee. They discuss the decisions being made by the central bank and decide whether or not to make any changes to the platform’s lending criteria as a result. This may include raising borrower rates or reducing the average loan-to-value (LTV) on the platform’s properties.
“Property fluctuations always affect people’s attitude,” explains Auger.
“We have a prudent approach to every deal that we offer to investors via our platform. We are always conscious not only of the LTV but other factors, including but not limited to type of property, location, and borrower’s experience. This enables us to produce an accurate summary of the deal to be displayed on our investor’s platform.”
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As part of its credit process, Kuflink favours developers that take a “pragmatic approach” towards the development, with Kuflink taking the same approach. This means that the platform can maintain its loan volumes regardless of the impact of the wider macro-economic environment.
It is this pragmatic attitude that has allowed Kuflink to deliver returns of more than seven per cent over the past few years, while maintaining its record of zero investor losses.
Auger is now looking at the opportunities in the current property market.
“As a growing society, the need for homes is always there,” he says. “The challenge at the present time is the rising cost of materials and labour. It highlights that lenders need to remain prudent in their vetting of applicants to ensure, to the best of their ability, that the costings are accurate, and the appropriate contingencies have been factored into the costings.”
Over the coming months, Auger expects to see a rise in borrower enquiries, as traditional lenders pull away from the market. This means that the platform will be busy sorting through reams of new funding applications and sorting the wheat from the chaff.
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“We at Kuflink are confident that our process for underwriting new applications puts us in a good position,” Auger says.
“There is always a silver lining for specific cohorts of people in every situation, we are continually reviewing our product range to investors to align it with market conditions and ensure that we offer an alternative proposition to traditional deposit takers.”