January 2021

January 26, 2021February 22, 2021

Property Investment in London, UK

London has remained a popular destination for overseas investors. As a global city and trading hub, overseas investors have always found London a reliable destination to park their capital for long-term growth. While there have been some mix signals about the future of the London property market following Brexit, we believe that London will continue to remain at attractive destination for overseas investors looking for a long-term investment.

Over the past decade, London property prices have increased steadily increased and this has impacted rental yields. While this has deterred many investors, we believe there remains good investment opportunities. Some of the key factors we often emphasise to investors when looking for good investment opportunities include:

Below Market Investment: While it is often hard to find, securing properties below market value are critical for property investors and provide a good hedge against market fluctuations, and can prove beneficial in the financing process. We have discussed how investors can go about sourcing below-market investment opportunities here.
Value-Adding Angle: As property investors, it is important to enhance the value of the property that you purchase, which would increase its market value and returns/yields that can be extracted. This can be done in many ways, from a simple refurbishment to freshen the image of the property to heavier refurbishment that could include increasing the total liveable space (e.g. loft conversion, rear/side extension).
Good Transportation Connectivity: While some investors are cautious about venturing beyond the familiar (and highly prized) Zone 1 locations within London, there are plenty of good (and more affordable) opportunities in other Greater London boroughs. These locations often offer bigger properties with some external garden space, key factors for home buyers or tenants in the new work-from-home normal. However, the critical factor of connectivity does not change, and finding a place within close proximity to a tube or train station remains essential.
Proximity to Good Schools: Similar to the point above, proximity to good schools can be a huge benefit and provide a premium rental yield. Moreover, tenants are unlikely to move as frequently once they find a place close to a good school for their children, offering longer leases and greater rental stability.

January 18, 2021February 19, 2021

Outlook for Commercial Property in 2021

Commercial property has typically been a popular asset class among institutional investors and funds and not an area which has attracted attention for retail investors.

Commercial property as an asset class tends to be higher-yielding than residential buy-to-let, and demand can be high in the right market. At the same time, commercial property contracts often come with rent guarantees along with long leases from business and corporate tenants, promising stable and growing rental income.

However, unlike residential property, commercial property is more susceptible to economic changes as it relies on business activity and job creation, and valuation is similarly driven by rental income.

In this regard, one of the effects of the Covid-19 pandemic has been the significant impact it has had on commercial property, both the larger office buildings as well as the smaller high-street commercial buildings. Stemming from this, the UK Government announced major changes to the planning system in England in September 2020, making it easier to redevelop commercial sites and build new homes to meet the country’s housing shortage. Some of the key aspects of the changes include:

An extension of the permitted development rights through reforms to the Use Classes Order “commercial, business and service”. This means that a wider range of commercial buildings will now be allowed to change to residential use without the need for a planning application. Pubs, libraries, village shops and other types of uses “essential to the lifeblood of communities” will not be covered by these flexibilities.
Flexible measures to enable vacant or redundant residential and commercial buildings to be converted to residential properties within the same footprint. The Government has mentioned that “normal planning applications” will not be required.
Allowance to build additional space above commercial properties via a fast-track approval process, subject to neighbour consultation. This includes upward extensions.

Altogether, these changes cut down the lengthy, bureaucratic planning impediments that hinder property investors and will allow greater flexibility to investors looking to repurpose commercial property. This opens an exciting and lucrative opportunity for investors who are looking for new opportunities to build and enhance their property portfolios.

As a specialist in both residential and commercial property, FPI is in a strong position to support investing who are interested in exploring the new opportunities in commercial property investment and repurposing. For more information, get in touch with us to arrange a free, no commitment discussion.

January 11, 2021February 19, 2021

Opportunities in UK Property for Overseas Buyers

United Kingdom and London in particular has long remained popular destinations for overseas investors looking to invest in global real estate. In this article, we look at some of the key reasons why.

Historically, as a developed market, the UK has attracted significant investments from overseas buyers. The key reasons include a significant mismatch between housing demand and supply, which has in turn driven strong capital and yield growth, as well as limited restriction on the inflow of capital from overseas buyers.

Mismatch between demand and supply: According to the Office of National Statistics (ONS), there is expected to be a shortfall of over 100,000 homes each year for the next decade, creating an imbalance in supply vs demand. Moreover, the UK population is steadily growing, compounding the housing needs. At the same time, lifestyle choices and economic (affordability) reasons have also spurred a growing ‘generation rent’, with more people choosing to rent longer (20% of population).
Strong Capital Appreciation: Despite the vicissitudes of the property market, the UK property market has not disappointed investors who are invested for the long-term. As reflected in the UK House Price index below, prices have steadily increased in the past decade, on average doubling every 7 to 10 years.

No restriction on foreign ownership: Unlike many other countries, the UK has little to no restrictions for foreign ownership and this has allowed overseas buyers gain access to almost all types of property investment deals. This has contributed to significant capital inflows from overseas buyers. In 2019, the UK Government announced an additional 2% stamp duty for foreign buyers. While this is a dampener, we do not see this as a significant impediment for overseas buyers in the longer term.

Beyond the above factors, as we move into 2021, there are some additional reasons why the coming year or two would serve as an opportune moment for overseas buyers is looking to invest in London and UK real estate.

Favourable interest rates: The current Bank of England rates are at 0.1%, and are expected to remain at this level for the foreseeable future. This has provided opportunities for investors to pick up attractive financing packages to fund their real estate investments.
Weaker British Pound: The British pound dropped over 10% since the 2016 Brexit vote and has not recovered since despite the Brexit deal that was recently announced. This has strengthened the purchasing power for overseas buyers, making investment into UK properties more attractive vis-à-vis other developed markets like the United States and Australia.
Tax Efficient Structures: The tax regime is relatively straight-forward and transparent, and with a good tax advisor, investors can make their real estate investments work for them. Given recent tax changes, property investors are increasingly investing through SPVs or limited companies, which offer certain advantages. FPI also has strong partnerships with PropTech companies that simplify the set-up process and facilitate deal structuring (more applicable for multiple investors).
Covid-19 Impact: The fallout from the global pandemic, with a looming recession and high-level of unemployment, will inevitably feed into the property market. This could result in a drop in house prices as well as more distressed sales. This presents opportunities for investors who are able to move quickly and have funds in place to snap up bargain deals that come up.

We believe the coming years will present a good opportunity for overseas investors to invest in UK property. At Focus Property Investments, we specialise in working with overseas investors to make investing in UK property an easy and hassle-free process. For more information, please get in touch with us to arrange a free, no commitment strategy and investment planning session.

January 4, 2021January 25, 2021

Sourcing Below Market Value (BMV) Opportunities

When it comes to property investment, similar to equity investment, every investor is looking for below market value or BMV investment opportunities. These essentially refer to properties that are marketed for lower than their actual market price, which is often determined by recent transactions of comparable units in the area.

It is often said that the best way to find a BMV opportunity is to look for a motivated seller, or someone who is looking for a quick sale. And there could be a number of reasons why someone may want to do so. The three ‘D’s have often been cited as common reasons why sellers want to sell a property at a discounted rate:

Death: In most cases, upon death, family members usually would opt for a quick sale so that the assets can be distributed to the relevant beneficiaries.
Debt: The seller may be facing a financial difficulty and hence is looking to liquidate his/her asset to gain some liquidity; or in cases where the bank has repossessed a property, they would be looking for a quick sale to regain their principal.
Divorce: Property tends to be a sticking issue in many divorce proceedings, and couples would rather opt for a quick sale to ensure a clean break.

Nonetheless, while there many motivated sellers out there, it is not easy to locate these sellers. It takes time and effort working on the ground and building relationships with local agents, solicitors, lenders, and others within the property chain, who may be able to sound them off to potential opportunities. This can be challenging for busy or passive investors, who are not local in the area or who may be based outside the United Kingdom.

In our experience at Focus Property Investments, we have found that one of the most effective ways to source BMV investment opportunities are through the property auctions, which occur regularly throughout the year across the United Kingdom and in London especially. One key reason is that motivated sellers are looking for speed and certainty – two factors which can be achieved through auctions. Once the hammer falls, the two parties are considered to have exchanged contracts, and the buyer would typically have between 14 to 28 days to complete on the transaction.

However, this often requires careful due diligence prior to the auction, such as viewing the property, establishing the background to the property and context for the sale, examining the legal pack for any red flags etc. Over the past 15 years operating within the property auction houses, we are spotted numerous brilliant opportunities, but also many awry deals which were nicely packaged to allure the naïve investor. Yet, once the right deal is found, it can serve as a great win-win outcome for both the seller and the buyer.

If you are a value investor, and are interested in sourcing below market value investment opportunities in the United Kingdom and London, please get in touch with us to explore how we can support you in building your property portfolio.