By Alessandro Pasetti, 9 August.
As the debate over the direction of property prices in Britain continues, we find ourselves having to gauge if and how weakness in the domestic property market could affect our healthy pipeline of real estate projects.
There are pockets of value in the UK portfolio managed by Inveztments, regardless of the broader dynamics that can affect domestic property prices.
As co-founder and managing director Tonino Montesanti pointed out this week, the allure of investing “in student accommodation estates offering a 10% yield for 10 years”, is obvious, and aside from one of the company’s flagship projects – Q Studios, which requires capital investment of just under £70,000 – other residential and hotel properties up for sale should be considered by investors.
“You might have to be careful, and surely you should be very wary about investing £2-£3 million in the real estate market in London, but our projects — given the full amount of commitment required — have those defensive characteristics that many yield-starved investors are looking for.”
So, is it time to be greedy or fearful?
UK and away
There are some mixed signals in the UK market, and some could scare conservative investors (those who tend to keep their hard earned cash under the mattress) — yet despite all the doomsday headlines that pepper the financial market, the UK property market is still growing in most regions, albeit at a slower pace than in the past.
Meanwhile, other European markets and major cities could be on a bounce. Take the Spanish property market, for example, where we also have projects (here and here): half-way through 2017, a major Spanish bank such as BBVA is now projecting a 10% rise in sales for the year.
PropertyWire recently wrote that the Spanish lender “is also predicting that sales will break through the 500,000 barrier for the first time since the downturn in the nation’s housing market prompted by the economic downturn a decade ago”. (Emphasis in bold is ours)
Meanwhile, in Portugal (a country where we have deep ties with a major real estate developer) Lisbon is basically bribing foreigners to help revive its housing market – and it’s working, with French investment boosting prospects there.
Bloomberg noted earlier this year that a growing number of French nationals are investing in Portugal’s real estate market as its economy accelerates and property prices rise. However, the news agency also noted that this group, looking for a fast buck in commercial properties, could find themselves in trouble, and it is a sector we have no interest at all in, for several reasons.
“Inexperienced, yield-hungry French retail investors are pouring money into real estate funds, pushing up prices for the best European commercial properties to unsustainable levels, according to Fidelity International Ltd,” Bloomberg wrote.
There remain tax considerations both in the UK — where a ground rent scandal has recently dominated the headlines — and in mainland Europe. “In the UK and Europe, there are tax considerations that have to be made on an ad hoc basis, but these should not prevent wise investors from scouting the right deal with our help after a careful round of due diligence,” Mr Montesanti concluded.
(This post was written by Alessandro Pasetti. Ale is the founder of Hedging Beta Ltd. He writes about investment strategy and assets valuation for European clients as well as Seeking Alpha. Based in London, he previously worked for about five years at Dow Jones/The Wall Street Journal, producing analysis for the IB community. Prior to that, he contributed to the launch of London-based Loan Radar, where he worked for three years. He had stints in equity research at Bear Stearns in London, HVB in Munich, and Unicredit in Milan.
It was edited by Gavin van Marle, managing editor of London-based The Loadstar. Gavin is also the author of the book Around the World in Freighty Ways: Adventures in Globalisation. He has won numerous awards, including the Seahorse Journalist of the Year 2011 and 2009, and Supply Chain Journalist of the Year 2010 and 2014. )