How to get exposure to London property

“Central London is a very international market”

Central London prime property is gradually being exported to international buyers leaving UK investors with fewer options when trying to get exposure to the growth on offer.

How to get exposure to London property

How to get exposure to London property

Marcus Phayre-Mudge, manager of the TR Property Investment Trust, has warned that Britain is “exporting” London’s most valuable property abroad.

“Central London is a very international market,” he said. “Every time sterling depreciates against the dollar or euro we are exporting our real estate. And it’s going out to people who are never going to sell it ever again.”

Phayre-Mudge gave the example of Ropemaker, the BP pension fund, which in 2004 sold all of its central London estate – the west side of Berkeley Square in Mayfair – to the Saudi royal family.

“That will never come to the market again, ever,” said Phayre-Mudge. “That is happening all of the time. Prime central London is being snapped up by foreign investors.”

But he said that this was supporting values in the capital and pushing rents up offering good investment returns.

Phayre-Mudge said demand for commercial property over the past two quarters in the West End of London has been predominantly driven by the technology, media and telecoms sector.

“Ultimately this is the young, intelligent, educated workforce globally who want to come to London. We make more animation in Soho than they do in Los Angeles in the States. The tech belt that runs from Kings Cross down to Silicone Roundabout is where it’s all at. That’s why we’re bullish on London property.

“But you have got to be able to get hold of the estate. If you want to go out and start buying it now it’s extremely expensive, you almost have to own it already.”

The five companies with exposure to central London are Great Portland, Derwent London, Shaftsbury, Workspace and Capco.

Phayre-Mudge said had investors put money in these five companies along with the five German residential property “players” on an equal rated basis total return in 2012 would have been 51%.

“The message is investing through equities gives you a much broader canvas to work with and give you access to those areas that are experiencing rental growth,” he said.

The TR Property Investment Trust invests predominantly in property company equities across Europe and the UK giving investors access to around 100 companies with exposure to property in Europe.

“The particular advantage of equities is the liquidity and the access it gives to particular sub markets,” said Phayre-Mudge.

Robert Boag, manager of UK Commercial Property – an offshore investment company, agreed that central London was a good investment prospect although his firm’s investment strategy is to buy physical property.

“We all expect the central London market to outperform,” he said. “But when you look at what is driving that there is a lot of overseas money and they operate different models from the way that UK property funds look at things.”

Boag warned that increasingly there is a divide between what the UK buyers look for from commercial real estate in London – predominantly income return – and what overseas buyers consider important.

“That is fine at the moment but these things have a habit of going off track quite quickly,” he said. “I’m not forecasting that central London will drop like a stone but I do think we need to look at the components of the return it offers and what’s driving it. For UK investors it has to come back to income and investing in places where rental incomes are rising.”

London Property & Equity Release

What Is Equity Release?

Equity release is the use of financial arrangements that provide the owner of a house, or other property, with funds derived from the value of the property while enabling them to continue using it.

How Does Equity Release Work?

Equity release is aimed at homeowners aged 55 and over. It allows you to take some of the value of your home as cash.

Equity Release on International Market

The equity market (often referred to as the stock market) is the market for trading equity instruments. Stocks are securities that are a claim on the earnings and assets of a corporation (Mishkin 1998). An example of an equity instrument would be common stock shares, such as those traded on the New York Stock Exchange.

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