Residential Investment Market

Q3 coincides with the summer months and traditionally a notably quieter period for the residential investment market. This year was quieter than usual in the south but not so in the north, for our Leeds based colleagues, where the demand for income continues unabated in those areas where a reasonable yield is available.

Three notable transactions typify where the market is and what it wants, starting with ‘River Crescent’ in Nottingham, comprising 129 apartments and the freehold of a prestigious block perched on the banks of the River Trent. Offering hi-spec apartments, a strong occupancy history, no voids and good income reflecting 6% gross yield with a margin on break-up, the far eastern based buyer recognized the strong fundamentals around owning this trophy asset and no doubt there was a currency play at the same time.

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 second transaction was the acquisition of a 300 unit portfolio located across seven blocks of flats in the Midlands and Leeds. Yielding over 7% gross and with a price point close to £30M, with asset management angles and yet another currency play for the buyer, the appeal was obvious.

Third and last, but by no means least, was ‘Sandgates’ in Chertsey, Surrey which comprised an unbroken block of 83 key worker units let on an FRI lease to a housing association with 19 years unexpired. This sold to a UK based institutional buyer at a figure circa £10M and a sub 5% net yield.

These are just three examples amongst many but the demand for good quality, well priced trophy assets with a fair yield and/or long income remains strong.

As predicted in our Q2 update, the furore around the dreaded B word has indeed kicked off in earnest and has undoubtedly caused some uncertainty and a lull in proceedings, in particular around stock levels and there is a distinct lack of well priced good quality stock available in the market at the current time.

We are very busy appraising a variety of new opportunities across the whole spectrum of residential investment and there has been a notable uptick in enquiries from lenders, administrators and receivers. Only time will tell as to how many and how soon these enquiries translate into sales.

On a more positive note, it is clear that demand is good and cash is ready for deployment. There are many who see the current market as a great opportunity to buy and we whole heartedly agree.

Michael Linane

DL +44 (0)20 7344 2623