Investment News

Commercial property markets back on firm ground after Brexit

by International Commercial Investment on July 3, 2017

Source: The Express

Commercial property is set to continue its recovery one year after the EU referendum result panicked investors who rushed to dump funds targeting the sector.

FTSE 250-listed St Modwen Properties and Great Portland Estates both deliver updates next week amid continuing uncertainty over the impact of Brexit.

Shares in St Modwen, the UK’s largest brownfield property developer, have bounced 45 per cent since its post-referendum dip and Ben Maitland, securities analyst at Beaufort Securities, expects to see healthy growth in net-asset value per share in next Tuesday’s half-year results.

“St Modwen has just sold its stake in the New Covent Garden Market development at Nine Elms Square in Battersea, south-west London, for £190million, which puts it on a sound financial footing,” said Maitland, adding that the land sale significantly reduces the company’s debt and balance sheet risk.

“The outlook for commercial property for industrial, logistics, private rental and student accommodation is good.”

Graham Spooner, investment research analyst at The Share Centre, said St Modwen is a buy as its debt has been reduced and the shares trade at a large discount to net-asset value.

Great Portland Estates will publish a trading update after May’s full-year results showed a pre-tax loss of £140.2million, with analysts forecasting profits of £58.2million in 2018 amid market resilience.

Hargreaves Lansdown senior analyst Laith Khalaf said it is now a year since open-ended commercial property funds were forced to suspend withdrawals after investors withdrew billions in a post-Brexit panic: “The sector has regained its poise as economic data has proved more robust than expected.

“Commercial property remains sensitive to a UK slowdown. London property is particularly vulnerable as the capital relies so heavily on financial services, which are considered a flight risk if Brexit talks go badly.”

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International Commercial InvestmentCommercial property markets back on firm ground after Brexit

Low-cost long-haul boom beefs up second runway case in spite of Heathrow, claims Gatwick chief

by International Commercial Investment on June 29, 2017

Source: Telegraph

Gatwick is hoping the Government will give the go-ahead for a second runway in its forthcoming airport plan after ramping up long-haul traffic beyond what independent experts expected it to hit.

Chief executive Stewart Wingate said the Government was set to start consultations on a new airport strategy this year and that he believes his airport now merits expansion more than it did when its plans were scrutinised by the Airports Commission lead by Sir Howard Davies in 2015.

“What we would like to see as part of the airport strategy is an endorsement of an additional runway as well as or instead of one at Heathrow,” Mr Wingate said.

He added Sir Howard had predicted Gatwick would only have 48 long-haul connections by 2050 if it built a second runway but a rapid rise in the low-cost long-haul industry means it now has more than 60 just with its existing single runway.

Mr Wingate said major commitments from the likes of Norwegian, which has said it would base 50 Dreamliner aircraft at Gatwick if it was expanded, had also substantially changed the proposition the airport offered from just a few years ago.

“As we went through the Airports Commission the question raised that we had to answer was ‘can you support long-haul connectivity’?,” Mr Wingate said.

“We would argue that Dreamliners and the low-cost long-haul market mean we are well placed.”

Mr Wingate was speaking as the airport welcomed a record 44.1m passengers in the year to March, up 3.2m on the comparable prior period.

Revenue rose 7.7pc to £381m thanks a higher level of sales in areas from airline charges to car parking. Charges to airlines rose 2pc but this was partly offset by an increase in the level of discounts offered to help encourage greater passenger numbers.

Mr Wingate said its charges equated to an average £9 per passenger, which he claimed was up to a third of the amount of some rival airports.

Costs also rose partly because it has employed more people and pay has risen. But its outgoings rose less rapidly (7pc including depreciation and amortisation) than sales which the airport said supported its operating profits.

The airport also splashed out this year with its largest ever level of capital investment in 12 months of £272.6m – including on a new security area in the North Terminal – and is set to spend £1.6bn in the seven years from April 2014.

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International Commercial InvestmentLow-cost long-haul boom beefs up second runway case in spite of Heathrow, claims Gatwick chief

Passenger numbers jump 8.1% as London Luton gears up for expansion

by International Commercial Investment on June 18, 2017

Source: Bdaily

London Luton Airport has revealed another month of passenger growth in May as it presses on with its ambitious expansion drive.

The airport ferried 1.4m passengers through its terminals last month, an 8.1% increase on the same month last year which comes off the back of a similarly impressive 13.1% increase in passenger volumes in April.

It comes as LLA continues its expansion efforts with current redevelopment focused on expanding its retail and dining offering.

The airport has lined up some big name brands, including Bella Italia and Krispy Kreme, amongst a line-up of 43 new shops and restaurants as it looks to compete with its bigger South East rivals Heathrow and Gatwick.

LLA’s passenger number surge comes at a time of increases across London’s major airports, with Gatwick and Heathrow both posting impressive numbers over the last 12 months and underlining the need to accommodate ever greater passenger volumes with new expansion efforts.

Nick Barton, Chief Executive Officer of LLA, said that it was ‘fantastic’ to see another month of ‘outstanding’ growth at the airport, which was now focusing on improving road and rail links in and around the airport.

He said: “Our investment is enabling us to offer not only a more relaxing and enjoyable airport experience, but also an ever-widening variety of destinations.

“Whether you’re a business passenger or flying away for a leisure break, LLA can offer options for all budgets, and we’re making the airport easier to reach than ever as we improve road links and public transport access.”

LLA has targeted a 50% increase in annual capacity by 2020 and has a number of expansion works in the pipeline, including a new £200m light rail service (pictured) linking the airport’s train station with the airport itself.

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International Commercial InvestmentPassenger numbers jump 8.1% as London Luton gears up for expansion

UK property prices set to rise by over 6% by 2021 fuelled by buy to let surge

by International Commercial Investment on June 1, 2017

Source: Property Wire

Property prices across the UK will rise by 6.1% in the next five years, bringing the average property value to almost £300,000, according to new research.

It is expected that property hotspots will emerge in the North of England with employment opportunities and business start-up rates helping to close the gap on the current property hubs of London and the South.

The research from Barclays Bank also predicts that buy to let investments and high net worth millennial investors are set to lead the way in fuelling the property market going forward and they are likely to look for higher yields outside of London.

Overall, despite an uncertain economic and political climate, the report says that the UK property market remains buoyant with prices set to rise by an average of 6.1% by 2021 with high employment rates and an increase in rates of average earnings contributing to rising property prices across the country.

London is set to see prices rise the most with growth of 11.88% by 2021, followed by the East of England with growth of 9.38%, the South East up by 8.74% and the East Midlands up 6.67%. Scotland and the West Midlands are both projected to see price rise by 5.88%.

The South West is expected to see price growth of 5.31% over the same period, the North East 5.31%, the North West 4.01% and Yorkshire and the Humber up 3.6%. Northern Ireland and Wales are set to see the lowest price growth at 3.04% and 2.88% respectively.

However, while the South of the country is expected to see the largest property price increase over this period, property investors are looking north for good value for money and income stability. Some 38% of high net worth investors looking to purchase property in northern regions think that property prices are going to rise there, with 27% who plan to purchase citing strong rental income as a reason to invest there.

The report points out that the Midlands has the fourth highest expected price increase in the UK at 6.28%, behind London, the East of England and the South East. Warwick in the West Midlands has emerged as one of the top 20 areas of highest growth, with an expected increase of 29.5%, driven by higher than average earning rates and the highest level of business start-up rates in the region.

Scotland has the fifth highest expected price increase at 5.88%. East Renfrewshire makes the top 20 areas of highest growth with an expected increase of 23.8%, with its large proportion of highly qualified residents expected to drive up prices.

The research reveals that younger investors will be a key driver in the growth of the UK property market over the next three to five years. The millennial investors surveyed have 41% of their investment portfolio tied up in property, compared to 23% amongst those aged over 55.

The younger group are also more bullish in their approach to investing in bricks and mortar with 75% intending to increase the percentage of their portfolio in property over the next three to five years, compared to just 10% of over 55s.

The research also shows that millennial investors are also more likely to own more than one property, compared to over 55s, and are reaping the financial rewards of multiple property ownership with 48% of their annual income generated from rent. Those aged 18 to 54 who are planning to buy new property are more likely to take advantage of a buy to let mortgages to fund future property purchases at 23% compared to just 7% of those aged 55 and over.

Despite figures from the Council of Mortgage lenders showing that buy to let lending has slowed, the research suggests that it is on the rise among investors who want to expand their portfolios despite the recent tax changes that affect them.

The report also reveals that higher value investors are seeking to maximise returns through property purchases 65% of those looking to buy doing so for rental income. Some 62% of those with rental properties expect the proportion of the income they receive from rent to increase over the next three to five years, with half predicting it will rise by up to 20%.

‘It’s encouraging to see that property is still viewed as an important part of the investment portfolio with high net worth investors typically owning three properties and over a quarter planning to buy property because they believe that it offers long term investment security,’ said Dena Brumpton, chief executive officer of Wealth and Investments at Barclays.

‘There is also increasing confidence among property investors, as many are taking a long-term view when it comes to putting money into property. It’s also interesting to see from our research how investment prospects are emerging outside of the established property heartland of London and the South of England, with economic growth and employment opportunity fuelling growth in hotspots across the UK,’ she explained.

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International Commercial InvestmentUK property prices set to rise by over 6% by 2021 fuelled by buy to let surge

London house prices to soar by 11.88 per cent by 2021

by International Commercial Investment on June 1, 2017

Source: CITY A.M.

London house prices are set to rise by an overall average of 11.88 per cent by 2021, almost double the national average (6.1 per cent), according to a new research by Barclays wealth and investments.

The study found that Richmond upon Thames will enjoy the largest increase in the UK at 39.1 per cent followed by Camden, Westminster and Wandsworth that are expected to grow at 33.9 per cent, 31.9 per cent and 31.1 per cent respectively.

The average overall price increase in London over the 2017-2021 period is expected to be 2.27 per cent per annum compared to 1.31 per cent in the UK.

Investors from London own an average of four properties while the total value of a property portfolio in the capital is over £2.2m. Also, over three-quarters (79 per cent) of investors in London said they plan to buy new property in the next three to five years.

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International Commercial InvestmentLondon house prices to soar by 11.88 per cent by 2021

UK construction grows as housing market stabilises

by International Commercial Investment on May 4, 2017

Source: The Telegraph

Britain’s builders are getting back to work as housebuilders try to meet demand for new homes and large civil engineering projects get under way, following a modest slowdown at the start of the year.

Last month growth accelerated in the construction sector, encouraging companies to hire more staff to meet the rising demand.

Overall construction output grew at its fastest pace so far this year, according to the purchasing managers’ index from IHS Markit.

The current level of growth is still relatively modest, however – in January 2014 the PMI reached 64.6.

“The housing sector offered up the best news recovering from last month’s minor blip and building on its strongest performance since the end of last year,” said Duncan Brock of the Chartered Institute of Procurement and Supply.

“Employment growth rose to its highest since May 2016, though continued disquiet about the lack of highly skilled labour availability persisted, and must be addressed if the future strength of the sector is to be assured.”

Building firms rely heavily on imported materials, which are becoming more expensive due to the fall in the pound. The price pressures eased a touch in April but remain uncomfortably high.

Those inflation pressures are also limiting households’ spending power, which could hit the market. As a result, the industry may rely on the Government to fund its growth.

“Construction companies will be hoping that recent Government measures aimed at boosting infrastructure and housebuilding (including in last November’s Autumn Statement) have a material beneficial impact,” said Howard Archer, chief UK and European economist at IHS Markit.

“Measures announced include £2.3bn being earmarked for a new Housing Infrastructure Fund, which will be used to support the infrastructure needed to support the building of up to 100,000 new homes.”

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International Commercial InvestmentUK construction grows as housing market stabilises

Brexit not deterring Asian investors from UK property market

by International Commercial Investment on April 28, 2017

Source: BBC News

Investing in property is a mainstay of most Asian portfolios and the UK has typically been among the most desirable of destinations.

Recent data suggests that despite the uncertainty created by Brexit and the upcoming general election, Asian investors are flocking to the UK’s shores more than ever before.

Research from property investment firm JLL indicates that Asian investors accounted for 28% of the transactions in the UK property market in 2016, up from the 17% the year before.

London in particular continues to be a strong attraction, especially for Asian families who have long had a link to the city.

Pamela Kirpalani’s family is originally from India, but she now lives and works in Singapore and runs her own training consultancy, Singapore Inner High Living. Her family are long time investors in the UK property market.

‘London is London’

“London for us will always be a safe haven,” she told me.

“Our families are spread across India and Singapore and eventually we would like our kids to go to college [in the UK].”

Pamela’s family has recently bought their third place in the heart of the city.

“London is London,” she said. “Even with the panic of Brexit, and things go up and down in the economy, property prices in the centre of London just always bounce back. So you just can’t go wrong with that kind of investment.”

It’s investors like Pamela that led Manchester-based Select Property to set up an office in Singapore in 2015.

Elliot Vure is the Asia sales manager for the firm. He showed me a model of the latest development – Affinity Living – that the company is building in Manchester, and selling in Asia. On average one of the flats in the building costs about £275,000.

“We’ve probably seen 30% to 40% of the development being sold to Asian investors,” he told me as we toured the firm’s offices in Singapore.

Mr Vure added that there’s a unique aspect to the way Asians buy their property in comparison to other buyers.

“The vast majority of almost all of the investors in this region are cash purchasers. There’s no real desire to get a mortgage,” he said.

“People in the UK look for financing and a mortgage, but in Asia it seems to be the opposite.”

A lot of that wealth is coming from China, which has been one of the biggest buyers of UK property in the last year, buoyed by the weaker pound in the wake of the uncertainty caused by Brexit.

According to Juwai.com, which calls itself China’s leading international property portal, growth in the enquiries into UK property in the last 12 months has jumped 60%, and Chinese buyers are increasingly interested to the UK.

“A lot of our buyers are the average Chinese mom and pop looking to invest overseas,” Sue Jong, the chief operating officer of Juwai.com told me.

“The large portion is the middle to upper middle class, that’s interested in a good stable investment and may be thinking about emigrating or sending their kids to school there.”

The demand for property amongst Asian investors has convinced many that this is a market worth expanding in.

But it’s not just physical properties that Asians may be interested in buying.

Prop-X is a property exchange launching later this year, offering Asian investors a shot at owning a share of a property, without so many of the risks.

“What seems to be a fundamental part of the culture is that Asian investors have had a preference for investing in bricks and mortar,” chief executive Rohin Modasia told me.

“It’s a long standing trend. Post the global financial crisis, the UK has performed pretty well. And Asian investors now are more willing to say I’ve seen it happen, I’ve seen my friends do it, and I’m keen to get in on the action.”

By some estimates, two thirds of the global middle class by 2030 will be living in Asia. They’ve been the driving force behind investor appetite in global real estate markets, including the UK’s.

As Asia’s middle classes get richer and more aspirational, that appetite is only likely to grow.

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International Commercial InvestmentBrexit not deterring Asian investors from UK property market

Brexit is definitely happening, but here’s why it won’t deter overseas buyers in London’s prime property market

by International Commercial Investment on March 31, 2017

Source: City A.M.

Foreign investors – and, in particular, those from the Middle and Far East – have played a prominent role in transactions at the high end of London’s property market for decades.

Having founded and managed a super-prime property development firm since 2009, we experienced first-hand the impressive amount of capital this buyer-type could deploy. From the Grosvenor House Hotel to The Shard, international purchasers have snapped up some of the city’s finest real estate assets.

For instance, CBRE estimated Hong Kong investors had accumulated £4.5bn to target Prime London assets by 2016’s close. Developments we have recently been involved with in Belgravia and Chelsea also continue to attract interest from overseas buyers post-referendum. So why this unshaken confidence?

The benefits of a weakened sterling

Put simply, nothing has really changed for foreign investors – except, crucially, the pound’s value, which slumped after the referendum.

Combined with a better than expected economic environment, this equates to a win-win for foreign investors who still enjoy the security of UK property law reinforced by EU legislation, but at a cut-price, owing to weaker pound versus dollar/euro ratios. As a result, these buyers have capitalised by purchasing now and the signs are that they will continue to, even after the Prime Minister chose to formally invoke Article 50 on Wednesday.

What’s next?

Whether foreign investor activity in London’s prime property market can continue at its current pace hinges on the looming Brexit negotiations and subsequent economic policy. Detailed predictions are fairly pointless at this stage but, in general, there are two outcomes which we think are reasonable possibilities.

The first is that the Government attempts to tax and regulate overseas buyer activity more heavily, as a politically easy way of recouping money lost elsewhere.

Taxes on vacant homes or on foreign nationals purchasing property (such as operates in Vancouver) would likely cool international demand in the short-term. However, long-term effects would be more muted, as the new levies are factored into financial planning.

The second outcome is one whereby foreign buyer activity is more actively encouraged, as the Government fears losing its status as a world-class investor capital. Stamp Duty at the top end of the market may be cut – and the same goes for Corporation Tax.

The eternal investor?

Regardless of what happens next in terms of Brexit, we don’t foresee overseas buyer activity in the capital entering terminal decline in favour of another European city.

Great cultural and commercial centres like Paris and Milan cannot offer foreign buyers the returns they have become accustomed to in prime London. Foreign buyers are here to stay – time to, as the PM remarked, “make a success of it”.

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International Commercial InvestmentBrexit is definitely happening, but here’s why it won’t deter overseas buyers in London’s prime property market