An investment firm has flagged up the recently announced move by banking giant Lloyds to enter the private rented sector as ‘hedging against inflation and currency devaluation’.
Lloyds Banking Group has launched a new brand – Citra Living – through which it aims to pursue its goal of becoming the UK’s largest private landlord. The high street bank has plans to acquire 50,000 properties over the coming decade. But what can we take from this?
According to the team of financial and property experts at Fabrik Invest, Lloyds’ designs on the private rented sector reveal plenty.
Dale Anderson, managing director of Fabrik Invest, said: “If banks are buying property, this indicates that they’re hedging against potential inflation and the potential devaluation of the pound. With everything going on in the world, banks and governments naturally had to take into account quantitative easing, which means they're going to be printing more money to stimulate the economy.
“It looks like Lloyds is now putting a strategy into action to take advantage of the repercussions of that.”
The UK’s record low borrowing rates also come into play, Fabrik says, with banks jumping on the bandwagon and investing.
“Other corporate and larger clients are doing the same, meaning we’re likely to see more larger funds and family offices investing in bulk purchases in property over the months ahead,” Anderson added.
The firm says there are other factors at play, too, with Anderson flagging up cryptocurrencies such as Bitcoin as an example.
“Inflation and monetary value aren’t what they used to be. Cryptocurrencies have given people more control over currencies, and banks less so, so that’s a factor that’s feeding into Lloyds’ move as well,” he insisted.
“Then, of course, there’s the traditional position of bricks and mortar being a safe haven in times of economic uncertainty.”
As inflation rises and the prices of things go up, Fabrik says individuals and enterprises alike will be looking to invest in bricks and mortar, along with other hard assets such as gold, silver and land. It’s a pattern that has played out many times over recent decades, the company insists.
Lastly, Fabrik says, there’s the housing market itself to consider, with demand continuing to outstrip supply for homes in the UK.
“As a country, we haven’t been building houses fast enough for years,” Anderson said. “That underlying lack of supply means the property sector is a safe bed for Lloyds. With uncertain economic times on the horizon, we’re likely to see many larger institutions looking to the housing sector to provide solid medium- to long-term investment potential.
“It’s an encouraging sign for individual investors, as it shows the validity of property investment as a money-making strategy.”