BTR Opinions Build to Rent (BTR)

Covid-19 and the changing profile of international investors

As several countries remain in lockdown during the Covid-19 pandemic, global residential and commercial investment property specialist, Strawberry Star Group, look at how this is changing the make-up of overseas investors in the UK.

By Santhosh Gowda, Chairman, Strawberry Star Group 

Just before lockdown came into force, many were predicting a sharp rise in overseas property investments in the UK buy-to-let market attracted by the falling value of the pound allowing investors to maximise their dollar returns. Furthermore, the Chancellor’s announcement of the additional stamp duty surcharge for overseas buyers compelled many to predict a surge in investment right up until the enactment of these measures in April 2021. 

The pandemic has unfortunately muted much of this hype. Living through these unprecedented times, however, doesn’t mean international buyers will have turned away from the UK. We predict quite the opposite could happen. As confidence in the Euro falls, London as the financial capital of Europe should prove to be a resilient longstanding market for investors. 

The recovery from the last recession saw London emerge as one of the top two destinations globally for both commercial and residential property investment. Foreign investors largely recognised that as an asset class, the property industry had performed well against bonds, shares and commodities.

Despite the pandemic restricting global travel and transaction abilities, I am pleased to say that many savvy investors still recognise that this remains true for long term gains. Both Buy-to-Let and Build to Rent investors know that playing the long game with property, seeing beyond the immediate economic impact of the virus, and understanding the fundamentals of overheated supply in this marketplace, means investment will continue to see healthy dividends both for institutional and individual investors.  

Point to be noted is that although growth slowed down in the UK last year owing to Brexit, returns remained relatively stable. While capital gains in the prime and the super-prime segments reduced, this prompted investors to explore the new-build market to strike better deals. Savvy international investors are taking advantage of market conditions now to invest in new-build prospects. Commuter towns with fast transport links to Central London are being considered for their better value for money. Developments in regeneration areas with all amenities and facilities under one roof are top of the list.

Two brothers (UHNWIs) from Hong Kong were so impressed with our project ‘Lu2on’ and its BTL potential that they completed the transaction within two days. His friends and relatives are also showing interest in investing in some of our developments To help them understand our property on sale, we provide a complete online portfolio of products – online videos, virtual tours, market commentary and insights – which works well for the overseas market. They trust that what we are delivering is high quality and know that our schemes are always strategically located with high demand, able to weather an economic storm. 

We are seeing a lot more enquiries for bulk purchases from Hong Kong, as well as Singapore and Dubai-based property investors and family institutional investors with the liquidity and capital backing to take more risks and purchase sight unseen. With strong and stable economic foundations in the UK, as well as having some of the best universities worldwide, it’s clear that investors still view London as a safe haven. 

In addition, investors recognise that the BTL market in the UK is on a growth curve, with unlocked potential to meet increasing rental demand from students, healthcare professionals and young workers. The rental market is more dynamic than the sales market and increased uncertainty means households looking for a home will turn to the rental market first to meet any immediate housing need. Indeed, the rate of decline in rents during the 2008 recession was far more modest than capital value for homes, which meant returns to investors during this period never entered the negative territory.

Another investment sector that has grabbed the attention of international investors is the Build to Rent market. This is reflected in the increased number of Build to Rent units under planning or construction or completion in the UK. Strawberry Star is foraying into Build to Rent alongside BTS with word-class service standards in the UK. 

Overall, if we compare the UK residential property as an asset class investment to bonds, shares and commodities right now, it remains a good bet. There is a tendency of retail investors turning now to residential, knowing the high street will take time to recover. If you analyse the performance of all asset class investments, including tech and healthcare stocks at the moment, the projection for residential real estate will provide a much more stable return for investors. While tech and healthcare stocks provide good ROI in the short-term, property, on the contrary, is a long-term game. 

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