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Archive for March, 2010
Keep looking North! Opportunities in UK residential property
Has the appetite for UK residential property returned after the extremely bumpy ride of the last few years? Well, from speaking to a number of our UK and overseas clients, the answer is “absolutely”.
Back after a two year hiatus…
In fact, according to figures recently released by the Investment Management Association (IMA) sales of property to funds soared in October 2009, making property the most popular asset class for the first time in more than two years. Investors are being tempted back into the UK residential property by the recent economic recovery and the recent increases in value of UK property.
What´s up north then?
That’s all well and good but is it the right time to go back in and invest in UK residential property and where am I going to see real returns on my investment? London and the South, the Midlands, the North? Where is the real ‘value’ to be secured in residential property? Well, after careful study of recent buyer transactions, house price movements and various economic trends, we have targeted sourcing quality, high yielding, off market property in areas that have proven to return solid long term growth prospects in the city centres of Birmingham, Manchester and Liverpool.
Booming Birmingham
So, why these city centres and not others? Let’s take a look at Birmingham for example. Situated in the heart of England, it is the UK’s second city; it is a centre for leisure, wide ranging culture, internationally renowned shopping, major events and exhibitions, world class sport, vibrant nightlife and a thriving financial sector. It is at the centre of the country’s road and motorway network, has three mainline rail stations and its own airport. With a strong business and student community, coupled with our quality investment product it all stacks up! We have formed strong long term relationships with some leading developers in these cities and look forward to releasing details of new projects to you very soon.
Is the UK fairly valued? We think so.
But does the UK residential property market offer fairly valued residential property? We think so. Two main reasons why. There is a clear lack of supply of residential stock in relation to the demand and the recent super low interest rates are propping up prices. So certainly in the short term there is good value here. In the long term supply will inevitably increase and as the economy normalises, rates will rise making now the best time ever to invest in UK residential property…… at least in the three city centre areas we’ve just highlighted.
Latest from London
As for London, it has seen continuous inward investment at the top of the market, where there has been a flurry of transactions in ‘super prime’ central London property from foreign buyers looking to take advantage of the weak pound. There are opportunities in London but only for those that have large deposits, so able to secure favorable borrowing. We feel prices are clearly inflated still and will continue to only go one way offering very little value to most investors.
I will continue to monitor and gage the movements in the UK residential market and off course provide you with details of our latest discounted, off market investment opportunities.
Until then, all the very best,
Regards,
Andy
Torcana UK Director
What if Mr. Buffett´s prediction is right?
Let´s assume for a moment that his prediction of a US housing recovery sometime in 2011 is correct and let´s also bear in mind that people who have betted against him in the past haven´t done so well.
Is it better to wait until 2011 and start investing in property once prices start recovering? Or might it be worth using some money sitting in a (very) low interest savings account to purchase well priced high quality properties while they are still available?
It´s been a crazy 18 months in the real estate business, but as the Sage of Omaha himself said “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it”.
Translation: These fluctuations caused a flood of motivated sellers to appear. They won´t stay so motivated indefinately.
Kind Regards
Colin Murphy
Investors and property agents were jumping for joy last week when billionaire Warren Buffett said the U.S. residential real estate slump will end by about 2011.
According to Buffet’s latest annual shareholder Letter, “the industry is in shambles for two reasons, the first of which must be lived with if the U.S. economy is to recover. This reason concerns U.S. housing starts (including apartment units). In 2009, starts were 554,000, by far the lowest number in the 50 years for which we have data.
Paradoxically, this is good news. People thought it was good news a few years back when housing starts – the supply side of the picture – were running about two million annually. But household formations – the demand side – only amounted to about 1.2 million. After a few years of such imbalances, the country unsurprisingly ended up with far too many houses.”
Jokingly, Buffet offered three ways to adjust the imbalance:
1. Blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the “cash-for-clunkers” program.
2. Speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers.
3. Reduce new housing starts to a number far below the rate of household formations.
“Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious,” he said. “Prices will remain far below “bubble” levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.”
Kind Regards
David Shaw
Sales & US Sourcing Manager
After England rugby’s desperately poor recent form in this year’s 6 Nations cup, we are all wondering where glimmers of hope and better sporting days will come from to lift our spirits. Who knows, with Rooney’s current electrifying form, that day may be here sooner than we think against Egypt, (the Africa Nations cup champions) on Wednesday evening. However, in the meantime, some bright lights of hope (no more green shoots please) appear to be starting to shine again on the UK commercial property sector this year.
2010, and in particular the last 4 weeks, has seen a quite remarkable welcome return of not only confidence but also the buyers and investors to the UK commercial property market ……..and plenty of them! In fact, our strong network of sourcing partners, developers and financial institutions have never been busier and continue to locate and put forward off-market deals to meet this growing demand for strong yielding, commercial property. What a difference a year makes, I hear you say!
So what commercial investments are in greatest demand from these buyers and investors?
Put simply, ‘anything and everything’ that can deliver strong yields, has a solid anchor tenant on a long lease and is in ‘prime’ central London or the surrounding area. Tenanted offices and retail outlets in central London and logistical sites along the M4 corridor seem to be the most common requests.
In fact, the ideal is the following; we recently sourced and sold a 10,000 sq ft tenanted office property on Sackville Street in the heart of Mayfair. The property had a strong anchor tenant, (HQ for a large firm of European tax consultants), on a 10 year+ lease yielding over 6.0%. The deal exchanged and completed within 28 days which is every consultants dream. Safe to say both our buyer and seller were extremely happy too. Mind you by the time of exchange my colleagues had been approached by more than a couple of dozen other buyers wanting to view and bid for the same property.
We continue to try to source this holy grail of similar ‘off market’ London commercial investment opportunities.
Next week I will take a closer look at whether the same can be said for the UK residential investment market. Is the buyer confidence returning here as fast? Where is the current interest? Which UK locations offer the same value and how is it measured?
Well, until next week, good luck Rooney, keep smiling Martin Johnson and here’s to the continued growth in investor confidence and activity in the UK commercial property market.
All comments welcome
Best Regards
Andy Kiwanuka
Torcana UK Ltd
