PropTechFish, the mission ?

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So what is the mission of PropTech Fish ? Well quite simply its a blog designed to assess various investment platform’s for the small time investor (the fish). The limitations of a fish investor for the purpose of this blog is and individual who has £100 or less a month to invest. The blog will report back regularly on the progress of various platforms, as well as provide wider UK property market information.

Any information provided with in the blog should only be treated as a record of the authors own personal experience and provides no guarantees that a reader would experience the same outcomes. If you choose to invest in a platform, it is with your money and the risk is yours entirely.

The author of this blog has no preference with any platform discussed, with the intention being to provide an objective and honest assessment of the various platforms the UK market has to offer.

Finally read as much as you can before parting with any money and of course have fun investing !

Landbay Results

1st half 2017

The results for the first half 2017, investing on the Landbay platform are as follows –

Expected ROI 3.69%
Actual ROI 3.69%

This platform does not allow you to manually invest in specific loans so there is no feedback available on defaults, rather you invest in to either a fixed rate fund (3.69% ROI) or a tracker rate (currently 3.03% ROI). The vast majority of my funds on this platform are on the fixed rate option and it’s delivered exactly as expected. This is because you can set interest to auto invest and where as with other platforms you still have to wait for a investment opportunity to become available, Landbay accrues the interest as soon as a balance is queued for investment, meaning there are no gaps in return maximisation.

Up until last month the variable rate option was 3.32% ROI, it’s now dropped 3.03% ROI. Now bare in mind current UK inflation rate is at 2.8%, so in real terms the rate is a merger 0.23% ROI which makes this option entirely an unattractive investment opportunity at this time. Considering Mark Carney of the Bank Of England has been giving strong indications in recent weeks, of a possible base rate rise from the record low of 0.25% it’s interesting Landbay have chosen to do this. One would think if a base rate rise happens in the next few weeks then the variable rate should go back up. Either way Landbay are cutting it very thinly for an investor to make any kind of return on the variable rate. It is worth mentioning though, over the last 6 months Landbay have had periods of very high demand, driven more by the lack savings options in the wider market, to the point where new investors were being queued for up to 6 weeks. So Landbay could just be attempting to control demand. For me the fixed rate combined with a slightly safer investment opportunity in Landbay is encouraging me to keep Landbay on for reasons of portfolio diversification, just. But if a spike in inflation happens in the future, wiping out my fixed rate gain, i’m going to struggle to justify keeping Landbay in my portfolio.

So to conclude, Landbay has done exactly what was promised in terms of return. The platform is generally considered a slightly safer option than other platforms, because of the buffer of auto diversification plus it operates a provision fund to protect from defaults in the short term. The platform itself in a nice looking, easy to use, straight forward interface. The only negative being, which is a significant one, the rates are very low compared to what else is currently available in the P2P market place. I shall consider Landbay very closely over the next 6 months before deciding weather it has a place in my portfolio.

Collateral UK Results

1st half 2017

The results for the 1st half of 2017 investing on the Collateral UK platform are as follows –

Expected ROI 13.6%
Actual ROI 12.72%
No. Live loan parts 19
No. Loan repayments overdue 0

The highest interest rate on a loan part I have on this platform is 15% the lowest is 12% so I have averaged the rates across all the loan parts to arrive at an expected ROI of 13.6%. The actual ROI is 12.72%, which accounting for timing discrepancies with deposits and reinvestments associated with a manual investment strategy, it’s pretty close to what was expected. A plus with this platform is there is no minimum investment and there has always been investment opportunities available so as soon as a balance has been released, meaning you can maximise your return. Occasionally cash back is also offered on specific loans in the primary round adding further to your return, but you have to be quick, a passive investor (logs in less than every 2 weeks) is unlikely to catch them. For the passive investor you do have the option to auto reinvest, personally I have preferred a manual strategy so far.

I am yet to experience any difficulties or defaults with invested loan parts, in fact many of the loans have already been repaid and the funds have since been reinvested in to new loan parts. I have noticed a few defaults/over due loans on the platform so it does happen, it just seems i’ve been fortunate so far. The platform itself is very easy to use, if basic. I’ve not needed to use the secondary market at this point so i couldn’t comment on that aspect.

In conclusion, i’m very impressed so far with Collateral UK considering it’s one of the lesser know platforms, looking forward to what the second half of 2017 brings.

Funding Circle Results

1st half 2017

The results are in for the first half of investing through the Funding Circle platform and the headlines are as follows ;

Expected ROI 6.50%
Actual ROI 5.62%
No. Live loan parts 10
No. Loan repayments overdue 0

When i started investing on the Funding Circle platform you had the option to choose what to to invest in with a variable return based on risk level. This was the case right up until the 18th September 2017 (2 weeks shy of the half year review) so for the purposes of this review I will still assess based on the the original format. As you can see I had 10 loan parts invested in and all 10 performed as expected with none showing signs of default or late payments.

As for the interest rate the small discrepancy between expected and actual can be attributed to account roll up (deposits/investments being accepted, not falling on the optimum day of the month) which is to be expected with manual investments. The second reason for the discrepancy is the £20 minimum investment. This is a mixed blessing because it means theres usually a residual cash balance (below £20) in the account, good because you can withdraw a little at any time without having to wait for a whole principle repayment, downside would be, it is effectively dead cash ie. not earning interest while it rebuilds to £20 which stunts your interest maximisation.

The changes Funding Circle brought in September basically took away the manual investment option. So you can no longer choose what to invest in, a deposit is just split evenly over the risk range for you, either ‘balanced’ for an estimated 7.5% return or ‘conservative’ for an estimated 4.8% return. Same with selling, you just choose the amount you want to sell and the platform will decide where to sell it from. However the £20 minimum investment remains in place.

In conclusion I’m fairly satisfied with the results so far, no defaults, return is as expected. Minor annoyance with £20 min investment but I get from Funding Circles perspective, it’s to keep transactions down and cost on their end. Role on the 2nd half.

Lendy Results

1st half 2017

So the results are in for the first half of 2017 (financial year) of investing through the Lendy platform and the headlines are as follows ;

Expected ROI 12.00%
Actual ROI 4.58%
No. Live loan parts 16
No. Loan parts with repayments overdue 6 (37.5%)

As you can see the actual return on investment is significantly lower than the expected return on investment, there are a number reasons for this. Within days of starting this analysis Lendy decided to make a few changes. Firstly reverting back to its Lendy branding (formerly Saving Stream) , as well as this they announced that some of the new loans going forward would not offer the 12% ROI, I have seen some as low as 8% ROI. However this change should not affect my current investments as they are all 12%.

So one reason for the discrepancy comes down to my own strategy. In the name of testing the platform out, once I noticed some problematic loan parts that may be going in to default, I tried to sell on the secondary market. Unfortunately while the loan parts are awaiting a sale on the secondary market they cease to earn interest. The overdue loan parts were all on and off the secondary market over the first 3 months with all 6 being up for sale at the same time for a 3 week period. It was disappointing that not one of them came close to being sold. When selling loan parts they join the back of the queue and the closest I got to a sale was at the back of £30,000 queue, which had only progressed £2500 in 3 weeks, so by that rate it would have taken over 6 months to even get to the start of the queue. So i decided to pull the loan parts from sale. Either way i am not earning interest on these loan parts either because they are queued for sale or they in default/overdue not earning interest anyway.

Now I should clarify a few things, Lendy have updated their policy during this period, to paying interest on ‘queued for sale loan parts in the secondary market’ on request of the financial conduct authority (FCA) as part of the company’s maturing regulation compliance. However defaulting loans, logically still don’t pay interest, so doesn’t much help my situation and I will observe and report back how the new changes work out over the next period. Additionally as part of the compliance update you can no longer invest in over due/defaulting loans, some might say that should have been the case from the start but it’s a step in the right direction.

There has also been a potentially exiting development introduced in July called ‘Bonus Accrual‘. This could be seen as Lendy’s attempt to combat a seller biased secondary market place. Essentially you can earn up to extra 0.5% a month (6% PA based on a 12% investment) for holding on to your defaulting loans during the remaining tolerance period, paid once the loan is recovered. This is designed to assist developers close to completion get the job done sooner so the debts can be recovered from the sale of assets. Since this was launched a couple of months back i have continued to accrue this bonus interest on all 6 problematic investments but noting has been paid as these loans continue to be experiencing problems.

To conclude I would describe my experience in the 1st half of 2017, using the Lendy platform as mediocre. I love the look of the platform and the ease of use. However the liquidity of the secondary market could best be described as sluggish. The rate of defaults is stark but changes have been implemented to combat this. I do have concerns that the expected ROI is delivering to not even 40%, even by extrapolating the problematic 6 loan parts missing interest, and the playing about with the secondary market, there still seems to be a discrepancy of some 2-3% . However investments should always be viewed in the longer term so i will continue over the 2nd half of 2017 in a hope that this situation improves, but it’s been a rocky start to say the least.

UK Property Market Review 2016

UK housing figures

The total value of UK housing stock broke the £6 trillion mark for the first time by the end of 2016. When trying to gauge the health of the UK housing market its useful to look at several key figures.–

Home ownership – 2016 saw the lowest rates on record for UK home ownership at just 63.5%. This has fallen from 64.4% on the previous year and from an all time high of 73.3% in 2007. This figure is recorded annually but forecasts for 2017 are demonstrating a further decline. There are several reasons for this continued fall in home ownership : the continued shortage in new housing stock ; an ageing population occupying homes for longer than before ; prohibitive house prices in comparison to wages and credit or mortgages available on the market. All these factors combined are creating a perfect storm denying many the opportunity to enter the housing market.

New home construction rates – house starts in 2016 were 151850 units. This figure is up by some 8000 units on the 2015 figure of 143830 units. There does appear to be a gradual up turn in new house building productivity after years of sluggish construction, however the up turn will need to be sustained for some time to make any significant impact on the demands of the market as a whole. Current estimates cite a 500’000 unit shortage in homes across the UK.

Mortgage approvals – mortgage approvals for Q1 2017 declined slightly, down about 2% over the 3 months with an average of 67.84% approval rate. This is actually up slightly on the previous quarter of Q4 2016 which was 67.31%. This slight increase could be attributed to the additional new housing stock aswell as the materialisation of continued government incentives like ‘help to buy’. The latest decline however, for the start of 2017 could well be an anomaly attributed to the UK political situation. Article 50 triggered in March, local elections at the start of May and general elections announced in June could be giving financial markets cause for pause while the situation settles down, this would manifest itself as a tightening in lending policy to reduce financial institutions exposure to possible turbulence.

House prices – The latest UK average house price is £217,502. This is an increase by an average 0.35% on the previous quarter and a 3.8% increase year on year. This is the smallest increase in prices seen since May 2013, following a general consensus that the UK housing market is cooling. House prices in the UK should always viewed as two separate entities, the London market and the rest of the UK. London house prices are actually continuing to decline while the increase outside London is closer to 5%. A big factor in falling house prices in London is the exodus of foreign investors that have been artificially inflating the market for several decades. Conversely many of these investors are looking to alternative UK cities to invest their funds, applying an upward pressure to house and property prices outside of the capital.

UK commercial property figures

Commercial property is defined by any property utilised for the provision of jobs. This includes shops or retail space, industry and manufacturing, service and office space. Key figures worth noting for the analysis of the UK commercial property sector are as follows :

Total asset value of UK commercial property – the latest figures are £871 billion for the end of 2015 (this data is only complied annually, 2016 figures are still awaiting publication). This is the highest valuation to date for UK commercial property and makes up 13% of the overall UK built environment.

Level of investor activity in the UK commercial property sector – Investor activity in UK commercial property is currently in a state of flux. Investors are looking further a field than the capital for good opportunities but there has also been significant continued movement in 2016 on ‘who’ has been investing in the UK commercial property sector. Traditional UK institutions such as insurance and pension funds have been moving away from the UK with a drop of 10% over the last decade, where as overseas investors have increase by 125% over the same decade. What are described as ‘collective investment schemes’ are also up by 64% for the decade, this includes crowd funding platforms, Proptech & Fintech. There was a significant drop of 18% in investor activity around the Brexit vote however this has all but bounced back. So investor activity remains very strong in the UK throughout a changing investor landscape.

Key note commercial investments

The HS2 (High Speed Rail 2) – the HS2 finally passed its last major legislative hurdle in February of 2017. This huge UK infrastructure project is estimated to cost £60 billion but could run up to as much £100 billion by the time both phases are completed in 2033. The keynote contracts have now gone out to tender. This includes not just train, rail and cable contracts but also contracts for station construction in Manchester, Birmingham, Liverpool, Glasgow and Edinburgh. There is reportedly significant interest in these tenders from both UK and foreign investors for not just the construction but also the facility management and operation.

Crossrail 2 – Crossrail 2 is an extension of Crossrail 1 designed to bring the South West and North East of London together. The rail link is estimated to cost £30 billion but could also generate up to 200 thousand new homes along the route. The infrastructure project is still going through the funding and legislative motions and has not yet been finalised.

The Verdict

Home ownership has continued to stagnate and decline slightly in 2016 as private house rents are now significantly higher than a comparable mortgages, exacerbating the situation further, smothering the positive effects of the ‘help to buy’ initiative. There continues to be wide-spread speculation and stalling in the new house building sector, however there are signs that levy could be close to bursting, which would release a substantial upturn in new build activity. Mortgage approvals remain stable as some are able to obtain the required deposits for a house purchase though ‘help to buy’, altougth this is countered by the politically uncertain situation in the UK and some key indicators are now showing consumer debt over reaching to potential unsustainable levels. House prices are continuing to cool but rise marginly. Given the consistent upward demand in the UK housing its to see how house prices will fall significantly without a massive unpredicted shock to the economy (like a global recesion), so outlook is stable despite the uncertainty of Brexit.

Commercial property looks robust across the UK in 2016 making up a significant slice of the UK property portfolio. Although there has been movement in investor type in commercial property these voids seem to have been quickly filled with new technology platforms and hungry investors looking further a field than traditional the high street bank investments. There are also a number of major infrastructure investments and large developments in the pipe line across the UK with plenty of interest from investors.

So with the exception of the Brexit blip in June 2016 both housing and commercial investment sectors remain strong with plenty to be positive about for the future. Brexit remains the big unknown especially around the operations and future locations of the UK financial sector which could affect property though contagion, however with investments still so attractive in the UK despite head winds it’s difficult to see any major exodus happening post Brexit but it remains to be seen.

 

Collateral UK – An Introduction

Introduction

Collateral UK was incorporated in 2014 to offer a peer-to-peer platform to investors interested in investing in the UK property market. It specialises in short-term asset backed bridging loans. Usually but not always the investment opportunities are based around purchasing new build properties from the developer, with investments repaid when a customer or tenant is found for the property. Typical terms are 90 to 180 days. The advertised ROI is 12% but this can vary across specific loan requests. Collateral UK also offer a secondary market allowing investors the opportunity to exit early if they feel the need to.

There is no minimum deposit or minimum investment on the Collateral UK platform. This platform only currently accepts bank transfers, it does not accept card payments.

Available Loans Page

Screen Shot 2017-04-27 at 01.28.48

Image shows Collateral UK loan request page (with the property identity column removed).

The top row of the table (below the title row) shows the grand totals for all currently available loans. There are more rows on the platform than shown in this image so the totals look inaccurate but they are not.

 

Asset Value – shows the market value of the property requesting the loan.

Loan – is the value of the loan being requested on the assigned property.

% PA – displays the percentage ROI offered for each loan request.

LTV – shows the loan to value against the market value of the property. Collateral UK offer up to a maximum of 70% LTV against any property.

Available – is the current value of loan available for investment. If a loan is fully funded it is removed from this table until value becomes available again though an investor selling their loan part on the secondary market place.

Invested – Shows how much you currently have invested in to each loan request.

Remaining – displays the remaining time left on the loan term before expected repayment, in days.

Funded loans page

Screen Shot 2017-04-27 at 02.04.00

The image shows the Loans Funded Page for Collateral UK (with the loan identity column removed).

 

Age – the number of days you have been invested in each loan request.

Amount – shows how much you currently have invested in each loan request.

Start – is the date you invested in the loan request.

LTV – shows the loan to value against the market value of the property. Collateral UK offer up to a maximum of 70% LTV against any property.

Remaining – displays the remaining time left on the loan term before expected repayment, in days.

Interest – shows how much interest has been accrued for each loan request to date. Interest is paid to the platform account at the end of each month.

Sell – is the option to sell the loan part on the secondary market.

Renew – sometimes a borrower may request a loan extension or a loan renewal. This option allows your investment to be automatically rolled over to the new loan request.

Landbay – An Introduction

Introduction

Landbay is a peer-to-peer lending platform specialising in the UK buy to let property mortgage market. Landbay was established in 2013 in response to the resilience in the UK buy to let market thought the 2008 downturn despite property values dropping by 17%.

Investments on this platform are initially queued to await assignment to a suitable investment. However interest is paid on deposits (this has currently been suspended as of April 2017 due to excessive demand) even while in the investment que. Loan terms can be for as longs as 10 years on this platform.

Landbay’s minimum account deposit is £100 which can be invested in one of two options. Land Bay also operates a secondary market for an early investor exit option. You are also able to ‘Auto Invest’ interest earned to maximise returns.

The options LandBay currently offer

Screen Shot 2017-04-26 at 23.28.40

Investment options available on the LandBay platform.

Options are either a fixed rate of 3.69% ROI fixed for 5 years. Or at a tracker rate of 3.00% (plus LIBOR) ROI (Correct of April 2017).

 

The LandBay account dashboard

Screen Shot 2017-04-26 at 23.28.18

The Landbay account dashboard

The dashboard is very simple for Landbay –

Cash balance – shows any funds on the platform that are not currently invested or queued for investment. You are free to withdraw any funds at any time in the cash balance.

Invested funds – this shows all your invested funds assigned to loan parts. It also shows funds that are queued and awaiting assignment to loan parts. There is currently an estimated 2 month waiting list for loan assignment (correct as of April 2017) due to excessive demand.

Lifetime Interest – shows the total earned interest over the life of the account. This is also where you can access your statements.

With investments still queued for investment information on this platform will remain sparse, but more information will be added once the investments become active.