The UK buy to let market is worth approximately £200billion, the bulk of which is in the hands of amateur armchair investors leaving a fraction in the hands of professional asset managers.
Perhaps the lack of residential funds or indeed fact that prices appear to have suffered over the last few years, has lead many IFA’s not to view residential property as an investment grade asset.
From many conversations regarding our London Growth Fund, there is a view that their clients have enough exposure to property is through their own homes. I don’t share this view.
In the same way as I shan’t be selling my wife’s gold jewellery because prices have now hit an all time high, I won’t be buying or selling my family home because prices have peaked or fallen.
To be honest, my wife would probably kill me if I did either.
This leaves commercial property funds. This sector has been hit especially hard during the recession with businesses and the high street shutting up shop, shrinking or renegotiating rents downwards.
To put the market into context, a £10,000 investment in the FTSE All Property Index in Jan 2007 fell 63% in September 2009. Thankfully it has since recovered to £8,782, but it still represents a 12% loss nonetheless.
On the face of things the UK residential market has suffered the same fate. Indexing the latest Land Registry data, a £10,000 investment would have fallen to a market low of £8,802 in March 2009, but has recovered to £9,337, down only 0.6%.
At a time when the press is filled with negative headlines and tales of repossession, I understand it can be difficult to see the wood for the trees. However if we take a step back and look at the entire picture, London really does stand out.
Again using Land Registry data, our £10,000 investment fell by only 0.6% to £9420 in May 2009 and is in fact up 8% at £10,810.
Not bad I hear you say, but if we focus on Prime Central London (PCL), where Walls & Futures is investing, at its lowest point, your investment would have been up 2.5% back in April 2009 and today would be up 27% at £12,695.
There are several reasons why PCL has outperformed the rest of the property sector and would take another article to discuss.
However like gold, PCL is viewed globally as a safe place to park your money during an economic and/or political storm. It has also benefited from the weakness of Sterling has attracted more international buyers, especially from South East Asia.
With very little supply coming to the market and with the storm not showing any signs of subsiding, prices look to remain firm and robust. Perhaps a few UK based investors will take a step back and understand what the rest of the world is seeing.
