Residential Investment Market

`Cautious’ and `resilient’ are the most apt words to describe the UK wide residential investment market over the last few months.

The northern markets in particular remain buoyant and are attracting interest from a variety of investors. Significant cash resources are available from a variety of property funds, whilst wealthy regional and local investors keep them honest by creating additional competition for piecemeal block sales.

Although we have seen capital growth and yield compression over the last 6 months, investors remain interested in the regions because opportunities tend to offer much greater returns than London and the south east. The main issue for investors remains the availability of good quality, unbroken, Freehold stock, which remains the most sought after product in today’s residential market.

In the south, outside London, demand is good for the right stock, correctly priced in the right locations and there is a clear flight to quality.

London is still proving challenging and although it is widely perceived that Central London may have hit the bottom, this is not the case in the outer London zones and there is a clear disconnect between vendors’ prices (undoubtedly due to historic valuations) and buyers’ aspirations.

New build flats priced in excess of £700 per sq ft are a particular challenge for investors unless discounted heavily.

Traditional investment stock such as regulated tenancies remain popular as the supply dwindles and houses priced below £400,000, as highlighted by our recent sales of The Capital Portfolio and two small regulated portfolios.

It was evident to us that the residential market quickly grew tired of Brexit discussions and it was business as usual in Q1 and Q2

The same positive long term investment fundamentals for residential property in all its forms continue to underpin the market in that people still need places to live whether to rent or to buy.

Demand remains strong for good income producing assets all across the UK albeit buyers are increasingly more discerning, thus careful and considered pricing is key. It is undoubtedly a buyer’s market.

Unfortunately the hoped for `Brexit bounce’ mentioned previously has stalled for obvious reasons and no doubt the same furore around the dreaded `B’ word will kick off in earnest in the run up to October.

On a more positive note, it was evident to us that the residential market quickly grew tired of Brexit discussions and it was business as usual in Q1 and Q2 hence we see no reason for this not to happen again in Q3 and Q4.

Michael Linane

DL +44 (0)20 7344 2623