Market Information

Why Invest in Residential Property?

"Records dating back to the Domesday Book of 1068 show that UK capital growth has averaged almost 10% a year for more than 900 years!"(Source "Building Wealth" by D. DeRoos)

The 1988 Housing Act dramatically improved the landlord's position and enabled the rented sector to recover strongly from decades of decline.

Demand for rented property has increased substantially throughout the UK since 1988, and particularly in the Greater London area. The Private Rented Sector (PRS) now represents 11% of the housing stock. The Department of Trade & Industry (as was) forecast in 1997 that 4.4 million more homes would be required by the year 2016. Based on the current market share of 11%, this would amount to half a million more rental properties being required. This would still be well below other industrialised countries - Germany is estimated to have a PRS of 35%, and France 27 %. (Source: FPD Savills)

Demographic and economic changes such as shorter employment contracts, a need for greater mobility, and division of the traditional family unit are all encouraging more people, especially in the 20 to 35 age range, to rent rather than buy a property of their own.

Supply of good quality 1 and 2 bedroom rented property, in the directors experience, is unable to meet the current demand. This is pushing rent levels up, providing a healthy rate of return on carefully selected and well-prepared investment properties (about 7%/8% gross rental yield is currently achievable in both Central London and selected Outer London suburbs, click here for more information.

Property values throughout Greater London have on average risen by 13.4% per annum over the last five years. The long-term trend in UK house prices has been positive with increases averaging 8.4% per annum since 1974. (Source: FPD Savills)

Diversifying away from higher-risk equity markets into residential property appeals to many investors nowadays. For most, the modest returns from deposit and savings accounts are inadequate. A residential property is a tangible asset - "an investment you can walk past" - in a market which most investors know and understand.

Gearing up (borrowing to buy) enables the Companies to spread their capital over more properties and to multiply any capital appreciation which should achieve an improved return on their own funds. See Investment Appraisal.

Mortgages are now available from certain Buy-to-Let lenders at very competitive rates of interest (from 5.49%*), enabling it to be met from net rental income. Furthermore, most financial commentators expect UK interest rates to remain low, in the medium term, as a result of a more stable macro-economic outlook. (* a 2 yr. fixed rate).

Earnings vs. Mortgage Debt - 1973 to 2000 The mortgage/earnings ratio among UK owner/occupier is currently at a level well below the peak reached at the height of the 1988/89 property boom. In our view, it is unlikely that the residential market will overheat in the next five to seven years as a result of excessively high levels of mortgage borrowing.