– LPP falls from 100 to 96.6 while house prices rise by 3.7%

September 5 2017 – The Lendy Property Pulse (LPP), the forward-looking property market index tracking five of its key drivers, fell in the last quarter as some fundamental drivers of the property market begin to weaken, says Lendy, Europe’s leading peer-to-peer secured property lending platform.

Lendy – The Property Platform says that the LPP fell to 96.6 from 100 in the second quarter of 2017, despite residential property prices continuing to rise. The average residential property price was up by 3.7% on average over the same period*.

The Property Platform says that residential property prices in some areas have far outpaced the fundamental drivers of house prices, such as earnings and levels of employment. The East of England in particular has seen its house price growth outpace the rest of the UK, with prices rising annually by 7.5% on average.

Lendy adds that the fall in the LPP has been primarily driven by a rise in new homes being built, which may serve to soften the potential for house price rises in future as supply increases. Lending to the residential market has also fallen, potentially showing dampening demand for property purchases.

The Property Platform says that despite a downturn in the LPP in the last three months, property remains a solid investment, although maintaining a more diversified property portfolio is preferable to investing in a single property in order to manage risk.

Liam Brooke, co-founder of Lendy says: “The widening gap between house prices and the forward-looking LPP is a reminder that potential investors must diversify their investments as effectively as possible. Investing via a peer-to-peer property platform is an easy way to diversify your investments.

“In our view, property will always remain a sound investment if investors manage their risks effectively, and make sure they diversify across different types of property investment and investment term.”

The five drivers of the LPP

The LPP index tracks key factors that influence the UK residential property market, including:

• Average weekly earnings
• Number of individuals in employment
• The gap between the Government’s 2020 housing targets and the number of houses that have been built
• Net mortgage lending for residential properties
• The average interest rate on a variable rate mortgage

Lendy says that lower Loan to Values (LTVs) play a key role in ensuring risk is reduced for their investors. Lendy sets a cap at 70% on all its loans, which means that risk can be managed for those lending through its platform.

The continued growth of property prices compared to their key drivers means that those looking to lend against property could benefit from choosing properties with lower LTVs

Brooke continues: “Peer-to-peer lending can offer reduced risk when entering the property investment market. Limited LTVs and having a first charge over a property provide protection against risk that a direct investment does not.

“Lending against property without taking on the equity risk of buying can be a better option for investors, providing diversified security rather than a large direct investment. Additionally, should any issues arise with the property, the lender is paid back before equity owners as a result of holding a first charge against the property.

“Diversifying exposure can also help to lower investors’ risks when investing in property. Peer-to-peer platforms such as Lendy allow investors access to different types of property and risk profiles. This can result in a broader mix of relatively higher yields and medium yields.”

The LPP will continue to track the key factors on a quarterly basis through to when the UK leaves the European Union.