Are clever investors turning net sellers of UK property?
Annual investment in the UK property market topped £42 billion in the first quarter of 2014, a level not seen since the heydays of 2007 just prior to the worldwide property crisis. Indeed such is the growing demand for UK property that more and more international investors are looking at London and other areas of the UK. The London property market has seen prices increased by 11% year-on-year with investment yields falling sharply although this does not seem to be bothering overseas investors at this moment in time.
However, it is a little-known fact that large UK property investment trusts such as British Land and Land Securities have actually turned net sellers of UK property over the last 6 to 12 months. This is the first time we have seen this since 2009 and there is speculation that the “clever money” is starting to trickle out of the UK property market and in particular the London sector.
Overseas investors benefit from currency situation
Currency fluctuations over the last few years have increased the attractions of UK property, and in particular London property, for many investors in areas such as the Far East. Indeed, even though UK house price yields are relatively low in some areas, when you take into account the currency fluctuations there has been a significant net gain for many foreign investors. As the UK economy continues to recover we will likely see a strengthening of the UK currency which will diminish the benefits for future overseas investors but potentially increase those for foreign investors who already have exposure to the UK property market.
Quote from PropertyForum.com : “I am moving to London UK from Canada at the end of the summer for a 2yr work contract. I will be working near Hyde Park and have a wife and 2 children. Looking for a 2 yr house/townhouse rental with 3 or 4 bedrooms in a nice neighbourhood not too far from downtown London. Any suggestions on location and what kind of price will I be looking at? Thx for any help.”
It is certainly turning into a very intriguing situation in the UK although there are growing concerns that overseas investors, especially those looking for a short-term return, will very soon look to pastures new for their future property exposure.
Inexperienced property investors coming to the UK
When you take into account the fact that relatively inexperienced real estate investors are now looking towards the UK, and experienced hands such as British Land and Land Securities are turning net sellers, this would seem to indicate a short to medium term correction for the UK property market. The emergence of relatively inexperienced investors is for many people the icing on the cake and perhaps the last piece of the UK property market jigsaw.
The truth is that many experts have been looking for reasons to downgrade the UK property market, to advise their customers to reduce their exposure and to look elsewhere. A number of situations do seem to be coming into play which could potentially strengthen the argument for taking short to medium term profits on UK property assets. However, there is also a growing feeling that global investors are still looking for so-called “safe havens” and with political stability, a growing economy and top-quality real estate, London and the UK seem to tick all of those boxes?
Conclusion
It is very interesting to see an increase in the number of inexperienced investors looking towards the UK and old hands such as British Land and Land Securities actively reducing their exposure. At this moment in time the balance is still most certainly in favour of buyers but slowly the seesaw of supply/demand is beginning to move and be could be entering a volatile and interesting stage in the life of the UK/London property markets.