Welcome to today’s email. We currently have a new service being tested for PCL (Prime Central London) investors – drop us a line if you are one – which includes Wednesday visits to key locations in London. These will run through to August, when I am away, and will resume for September at least until the weather turns. Meantime…
London Central Portfolio (LCP), the specialist property fund and asset managers, have analysed transactional data in PCL’s 51 postcode sectors to reveal some interesting facts and figures. Let’s quote, ‘With pockets of non-prime properties located next to traditionally affluent areas and council estates running side by side charming stucco terraces, neighbouring postcodes have distinctly different appeal. LCP’s analysis has enabled them to pinpoint the postcode sectors which offer the best investment record, on the basis of best value for money combined with best growth history.’
‘Capital appreciation is the most important investment consideration in PCL as it is the largest contributor to total returns for residential investments. Indeed, a recent survey from Sotheby’s International Realty said that whilst location is the key focus for 36 per cent of affluent buyers, an almost equal number (34 per cent) are driven by investment returns.’
‘LCP have found that all but one of the top investment postcodes is located in Westminster. These postcodes are concentrated towards the east of Hyde Park in the Marylebone, Fitzrovia and Covent Garden postcode sectors. These are all areas which have gone through a significant gentrification process over the last 20 years. They benefit from Central London’s iconic traditional architecture and the growing desire to be right “in the action” and close to transport links. Although every property needs to be scrutinised on its merits individually; Fitzrovia, Marylebone and Bayswater have been top of our ‘buy’ list for some time.’ Those of you joining me in London next Wednesday will receive fuller details.
When we invited members to become shareholders in the Cheltenham JV, the introduction was substantially oversubscribed and we had to turn investors away, some at a late stage. One or two took that well, others less so. To avoid this happening again with the crowdfunding offer, can
I stress that funds need to be in by 30 June. If you are coming in on this 10 per cent per annum offer, paid monthly, with weekly updates, regular visits and the chance to invest as a shareholder in JV2, please ‘get a move on.’ (If I were 17, I’d insert a smiley face or similar here).
Catching up on my press reading, I note that a Cathy Colston, a successful HMO investor, has been interviewed in the Telegraph. Quoting, ‘HMOs are more complex and involve more input and time. I don’t think they are for part-time buy-to-let investors or beginners. But they do offer the best returns. Younger people are looking for quality accommodation, and it’s in short supply. These people are happy to share with their peers, but the property has to be right. I obtain a yield of 15 per cent across nine HMOs, which are in Bath, Cardiff and Bristol. I need to sleep at night. I’m mindful of the fact that interest rates will rise. I need a yield north of 10 per cent on everything I buy.’
‘My buy-to-let tips? Be clear on your strategy – are you investing to replace an income, for capital growth? Research which buy-to-let model will work best for you. Get educated, and invest time in learning. What funds do you have available and what borrowing can you get? The lending market is a very different place from 10 years ago. What time do you have? Are you looking for hands-off investments or will you be running your own business? Get a good team to work with: mortgage brokers, builders, solicitors and so on. Property can be a very lonely game and is increasingly regulated. Mistakes can be costly.’
‘Research your investment location: know your market, your customers (tenants) and any planning and licensing requirements. Pressure-test your investments against higher interest rates. Would you still have a positive cash flow? Identify opportunities to add value to all your investments. Benefits can be realised when and if you refinance. Most importantly, have a plan. What are you going to do, where, how, and what is your key driver? How will you finance your purchases and refurbishments, and what is your exit strategy?’ Food for thought.
Chesterton’s has a new report out on the prime lettings market in London. Key points? ‘One of the main issues the market is facing is the decline in stock availability of 22.5 per cent compared to Q1 last year, which is predominantly caused by the increase in numbers of landlords selling their properties to benefit from the high capital values at present. As a result, tenants no longer have the same degree of choice nor able to negotiate the rental prices.’
The Chestertons Prime London Rental Values Index recorded a fall of 1 per cent in the year to end-March 2014 although certain submarkets show significant variations such as Camden (-6.6 per cent) and Kensington (+4.3 per cent). The average weekly rent for the Index stood at £907 at the end of March. The highest average weekly rental values were achieved in St John’s Wood (£1,872), Knightsbridge/Belgravia (£1,806) and Mayfair (£1,677).’
‘Once the balance between supply and demand has reached healthier grounds, rents are expected to stabilise/increase across the board, with Chestertons forecasting a rental growth of 2 per cent for prime London. In terms of prime locations – Tower Hamlets is forecast to see the strongest growth in household numbers of +29,548 over the next five years.’
All for now, see you again soon – by the by, we have a free ‘impact investing’ report coming shortly for all members.