How is Covid-19 impacting supply and demand in the bridging sector?

“Supply and Demand” - Colin Sanders, CEO of bridging lender Tuscan Capital, argues the case that well-intentioned government interventions can often create as many problems as they’re designed to solve.

Supply and demand. It’s the foundation of the economic rule book and the basic driver at all levels of the business ‘food chain’, including our own under-stress real estate sector.

At its most obvious, the impact of supply and demand is making itself felt in the scarcity of raw materials. In my daily conversations with developers, I’ve become aware of the struggles they face accessing sufficient supplies of plaster, mortar, bricks and even household tiles.

As a result, project completion times are being stretched and costs forced to rise.

Much of this can, of course, be attributed to the unique set of challenges being created by the Covid-19 health emergency. Brexit uncertainty, too, continues to play a part.

But not all the supply issues being faced by property professionals can be laid at the door of external factors. We’ve added a few home-grown ones too.

The effective suspension of mortgage lending throughout March to May this year, and the difficulties buyers have had finding a functioning removals firm, has meant that many property sales have stalled or been postponed.

Meanwhile, the government’s stamp duty concessions window has stimulated a surge in demand at auctions. Notwithstanding their ‘virtual’ context, sales frequently exceed both reserve prices and seller expectations.

The auctioneers’ only complaint is a dearth of available properties to sell.

The government’s forbearance policy for defaulting mortgage borrowers has caused the postponement of many possession hearings. With a four-month (and counting) backlog in the courts it will take time to clear, meaning that demand for repossessed assets at auction will outstrip supply for a while to come.

At this point, I can’t help but smile a little. Government policy reminds me of the game my kids used to play (and beloved by Boris). It’s called Whack-a-Mole and requires the player to use a mallet to eliminate one problem only for another to pop-up elsewhere.

Whether it be lockdowns, court closures or forbearance policies, the government’s actions have unquestionably caused dislocation to our fragile ecosystem which, in turn, will have longer-term economic implications.

Well-intentioned actions to mitigate the damage done by the epidemic have instead served to produce unnatural imbalances within the system.

Mortgage payment holidays, employee furlough schemes, stamp duty concessions, CBLIS and other interventionist initiatives might, on the face of it, offer a short-term boost. But for every winner from such expensively-funded schemes there will be a loser.

I’ve written on these pages previously that the property sector is well-adapted to absorbing and dealing with market shocks. It can do so again regardless of premature talk of ‘second waves’ and new social restrictions. But at some point the government needs to get out of the way. Only then will we see a restoration of the system’s natural checks-and-balances, the most important of which is, of course, supply and demand.

NB: This article first appeared in the October 2020 issue of ‘Business MoneyFacts Magazine’. For further information, please visit:


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