By any metric, the UK property market is facing an unprecedented challenge, as the pandemic continues to have a lasting impact on economies across the world. However, there is hope. Looking at China and South East Asia, where the virus has peaked, we are seeing small shoots of recovery as their lockdown ends. Although stocks, shares and commodities remain volatile, reliant on global stability, Asset Classes such as property have remained one of the best performers in the long-term for the UK.
For investors, looking at property – particularly new-builds – may be a win-win situation for both parties. Rental returns remain tipped for growth for long-term yield increases. As domestic sales subdue, demand for rental properties typically increases. Movement in this sector will be the key to keeping the UK economy going, reliant on investor transaction levels for a quick market recovery.
The closest comparison – although very different by nature – was the residential property market’s resilience after the global financial crisis of 2008. House prices collapsed, but they recovered earlier than expected, and even prospered. The rate of decline in rents was more modest than capital value for homes, which meant returns to investors during this period never entered the negative territory. What followed was an enormous policy shift to build more houses, with a particular focus on accelerating the new-build market. It was clear that the strong fundamentals of the UK property market were backed by positive investor sentiment. Even today, residential property remains the UK’s largest investment asset class and on a total returns basis, has been the best performing investment asset over the past 30 years (BPF).
In recent weeks, we have seen property investors look for bulk purchases at our development sites across Greater London, choosing quality new-build products with stable estimated yields. Often buying off-market, these investors include UHNWIs, family offices, trusts, and institutional investors from Hong Kong, Singapore, China and Dubai, with confidence that long-term capital growth across a ten-year period means their money is invested wisely. Our stable economic and political foundations, as well as having some of the best universities worldwide, means London remains a safe investment destination – and we’ve seen that time and time again. If you analyse the performance of all asset class investments at the moment, the projection for real estate will provide a much more stable return for investors. For example, whilst tech and healthcare stocks provide a good ROI in the short-term, property, on the contrary, is a long-term game.
Investments into the residential sector should not be made passively; returns can be enhanced through stock choice and location, good design, efficient management, and various fund structures. Real Estate Investment Trusts (REITs), Protected Cell Companies (PCCs) registered in regulated institutions like The International Stock Exchange (Guernsey), Property Authorised Investment Funds (PAIFS), property companies and joint ventures (JVs), are ideal vehicles to channel long-term investments in the property market.