U.S. investors are getting in on the hottest property market since 2006 by buying up huge developers from UK home-builders.This latest trend of build to rent is proven a windfall for home builders here but does it represent an opportunity for you and I?
According to the House Price Index published by the Nationwide Building Society, one of Britain’s biggest mortgage lenders; home sales prices last month increased by 13.4% higher than they were in June 2020. This is by far the strongest annual growth since 2004 and has pushed up average prices to almost £250,000, equivalent to about $344,200.
“The real-estate market just goes on growing and growing,” said Raul Cimesa, head of London new homes at real-estate agent Knight Frank.
Gladfish Property Investment is seeing growth in areas that have been stagnant since the 2008 recession, finally investors are seeing returns of their investment properties.
Despite this rise in prices, many home builders have seen some value eradicated off their share prices during the pandemic mostly because real-estate agents and construction sites had to shut down for about two months during last year’s lockdown.
“I am sure investors are seeing really good value in investing in housing at the moment. Share prices have taken a bit of a beating during the crisis,” said Ben Babington of Trilogy Land & New Homes.
U.S. investment firms benefiting from this detachment as they target the home sales market in London’s suburbs and regional towns and cities.
“Share prices have taken a bit of a beating during the crisis,” Ben Babington, director of house builder Trilogy Land & New Homes Ltd., said. “I am sure investors are seeing really good value in investing in housing at the moment,”
In January, for example, Lone Star Real Estate Fund, of Dallas, obtained retirement-home builder McCarthy Stone for £647 million, or £1.20 a share. The shares were trading above £1.50 in early 2020 before the pandemic.
More recently, Blackstone Group Inc. is securing a contract to buy St. Modwen Properties PLC, a FTSE 250 house builder and logistics company, for £1.25 billion. According to its most recent annual report, St. Modwen, which builds homes to sell and rents commercial buildings, had gained £22.1 million in 2020, down from £38.7 million in the year prior.
James Seppala, head of Blackstone Real Estate Europe, assured that St. Modwen would be given “significant additional capital” to expand its output—especially for building family homes in and around regional areas.
St. Modwen possesses a property portfolio valued at £1.37 billion and sold 948 homes in 2020. However, according to its annual report, its profit fell sharply in 2020 because of the lockdown that went on for about 9 to 10 weeks, plus reductions in rental income.
U.S. investors also are taking advantage of the weak pound. “Five or six years ago, the exchange rate was around $1.80 to $1.90, today it is more like $1.40,” Mr. Cimesa of Knight Frank said.
U.K. home prices increased during the pandemic mostly thanks to the Stamp Duty, on homes priced up to £500,000.
Real-estate agent Savills predicts that prices will keep growing but at a slower pace when the Stamp Duty holiday ends in September. The firm predicts a 21.1% growth in prices between 2020 and 2025.
There is also a big shortage of stocks for sale. There are currently 16 house hunters chasing every property on the market, according to real-estate agents’ organisation NAEA Propertymark.
U.S. investors also have on the lookout for rental apartments in the U.K. Rent levels fell during the pandemic but are starting to bounce back as workers return to cities. As of July, rents were 2.6% higher than at the start of 2021, and 6.2% higher than in June 2020. The exception is London, where rent levels remain slow.
As an individual investor this booming demand is likely to secure increases in prices for the foreseeable future and this will benefit all investors… although best not to wait around.
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