In the middle of a financial crisis like COVID-19, it's completely understandable to feel anxious or uncertain about your fiscal situation. If you're an investor, you've likely been assessing whether or not your current investment strategy will keep you in a strong position to prosper when we come out the other side, and if you're a borrower, it's natural to consider all of your options, including non-bank lending to find the best deal on the market.
One of the key questions clients ask us is "Should I be investing post-coronavirus?" and truthfully, the answer is very personal and case-by-case specific. There's no crystal ball that can predict exactly how the market will turn as we move through alter levels 2, to 1 and onward.
However, we can use the trends we are noticing globally as we enter the 'new normal' ion regards to peer-to-peer investments, and look inward to see what our own customers are doing. This insight in combination with a solid understanding of your own personal finances' state of play might give you, the investor, a little more confidence to invest.
What trends are we noticing with peer-to-peer investments globally?
As we're seeing traditional investment strategies hit by the global pandemic COVID-19 with New Zealand shares slumping by more than 10 per cent for the first time ever after the Level 4 Lockdown was introduced. Similar trends have been observed globally, with more than eight years of gains on the FTSE 100 wiped out in barely a month, and the index plummeting to its lowest level since 2011.
With the uncertainty of the stock market, the peer-to-peer investment sector has actually seen an overall increase in inquiries, as investors look for alternative and less volatile spaces to invest their funds, and borrowers searching for alternative lending options to the banks as they look to navigate through any financial hardship.
Many global financial advisers are actually predicting that peer-to-peer investing may emerge from the COVID-19 crisis stronger than ever. In fact, a report citing a poll by Croatia-based Robo.cash suggests that P2P investors are not displaying a knee-jerk reaction to the fallout from the coronavirus crisis. They actually found that more than three-quarters of European P2P investors are sticking with their strategies from pre-corona and haven’t touched a thing - quite an encouraging finding!
Essentially, globally the need for cashflow has increased in demand, and with the security of assets against peer-to-peer loans, investors seem to be deeming P2P investing a 'safer bet'.
Is peer-to-peer investing in New Zealand seeing a surge in demand?
Over the past few weeks, we can confidently say that we have been very busy looking after our current customers, answering questions and responding to inquiries from both borrowers and lenders alike. We certainly haven't seen a drop in activity! Plus, here at Southern Cross Partners we are as busy as ever with quality investments still coming our way such as;
- Residential dwellings both owner occupied and investment
- Lifestyle properties
- Further funds becoming available on current construction projects now back underway.
- Small renovation deals
As reported recently by goodreturns.co.nz;
"Second tier lenders say home loan customers are searching for alternatives as banks avoid taking on new borrowers or refinancing during the global pandemic. It comes as non-banks reduce their interest rates closer in line with traditional banks. Non-banks see an opportunity to take further market share in the current crisis."
In New Zealand, non-bank lenders experienced a 9.32% increase in gross lending last year according to advisory from KPMG, and it's looking like the demand for non-bank lending might accelerate this growth.
While we cannot predict the full extent of the impact of COVID-19 on the economy in New Zealand, it is fair to say that there has been a flurry of activity around inbound inquiries and Kiwis are looking to reassess their existing strategies and make sure they're following the right course of action.
So to answer the big question; should you invest post COVID-19?
Yes, if you're in a good position to do so and have a strong understanding of the risks and how to mitigate them.
As we've mentioned above, there's been a lot of demand for alternatives to bank lending, so there are some excellent opportunities for investment out there. But as always we'd recommend doing your full due-diligence before investing.
That means;
- Understanding the risks associated with peer-to-peer lending and mitigation strategies
- Doing a full analysis of your own personal finances and making sure that you're in a good position to invest
- Diversifying your portfolio to reduce risk
- Stay calm and take your time with doing your due-diligence before locking anything in.
- Consult with an adviser around what your options are and the best strategy for investment to suit your needs
If investing in peer-to-peer lending is something that you're interested in, feel free to get in touch with our team! We'd be happy to help you through it.
