Streetwise Property Alert 24th February 2014

Welcome to the latest round-up – plus, please note, you can access the UKPA and IPA PDF newsletters for February to the right…

Student Accommodation Update

The most recent CBRE Student Accommodation Index, to end Q3 2013, shows returns of up to 9.95 per cent a year. Peter McDermott of Go Global Investments is quoted widely in the media, ‘An investment in student housing generates far fewer headaches than your average buy-to-let, largely because the entire process is hands-off. The professional management company finds the tenants, maintains the building and uses economies of scale to drive down running costs. All the investor has to do is watch regular rental returns appear in the bank account.’

‘Likewise, this investment is low risk. Student accommodation now has a proven track record and its success is underpinned by exceptionally high tenancy rates of 98 per cent plus, alongside a chronic undersupply of dedicated housing in most top university cities across the UK. Applications to UCAS from outside of Europe, particularly the Far East, have seen average annual growth of 8.5 per cent between 2007 and July 2013 and this is a target audience for safe, quality accommodation within easy reach of campus. This asset class is also recession-resistant as the number of university applicants tends to rise in an economic downturn, as they postpone a career in order to gain more qualifications.’ We have an updated quarterly report coming and we are due to meet half a dozen of you tomorrow to view a site; looking forward to that.

Overseas Lease Options

We ran about a dozen lease option opportunities recently; we still have some availability – about 40/60 – but reply sooner rather than later please. We will have more soon (and, of course, those of you on that particular list will receive separate details on a regular basis from Nic).

Fitch Ratings – Outlooks

The Global Housing and Mortgage Outlook by Fitch Ratings highlights which markets are expected to lead the way in 2014. Here are their predictions – Brazil, up 6 per cent, South Africa, up 6 per cent, UK, up 5 per cent, Australia, up 4 per cent, Germany, up 3 per cent, Ireland, up 3 per cent, the USA, up 2 per cent.

‘For all 17 countries in this report, the mortgage/housing market outlook has either improved or remained broadly the same compared to 12 months ago. This is partly in step with the economic recovery for a number of countries but also as a result of government and central bank policy changes which are boosting supply and demand for residential mortgages and housing.’ We will focus more on particular countries in the weekly emails for Spain, France, America, and so on.

Now’s The Time

One of the reasons we are introducing the 50-50 JV opportunity with a developer right now – well to some of you – is that the land is secured and we are at the start of a sharp upward trend in land values. As Savills states, house builders looking to secure a five year pipeline are pushing up the value of residential development land at a rate not seen since 2010. ‘Improved confidence in the housing market is playing out in the land markets, with value growth driven by a strong demand for land.’

‘Acquisitive house builders are now channelling debt and equity into longer term sites to secure pipeline. This increased demand, in a market where supply remains constrained, means that land values are expected to continue their upwards trajectory. This accentuates the need for the volume of land coming through the reformed planning system to continue increasing at the rates we have seen during the last 18 months.’ We should by now have sent out the packs on the 50-50 JV venture – 28 per cent returns expected – let me know if you have not had yours.

All for now, please do read the UKPA and IPA PDFs and, of course, feel free to send them on to friends and colleagues. By the by, I’d like to invite you to join me at a Brazil investment seminar in London on the vening of 20 March. I am happy to meet earlier or stay later to discuss other matters such as the London and JV opportunities. Email
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