London, Where to investA guide to property investments in London

3. Introductions to the Current Market

5. Long Term vs Short Term

6. Residential Market

8. Commercial Market

9. Central London – Commercial Property

11. Central London – Retail Property

12. Central London – Hotel Property

13. Differentwaystoinvestinthepropertymarket

14. About Simon Morris

Content

In London it’s becoming particularly harder to purchase individualpropertyassetswithoutsignificantinvestment.With residential and commercial properties increasing invalue,thecapitalisattractingforeigninvestorswhohave available capital and a need for their capital to be invested safely. For the UK Investor, using regulated financialproductsdoesofferindividualinvestorsalternativeroutestogrowtheircapitalwithouttheneedfor hefty mortgages or deposits.

The high market entry prices have become so high that there are regulatedfinancialproductsthatofferinvestmentintoLondonproperty–butwiththeriskspreadacrossvarioustypesofpropertyandareas.

ThefollowingGuideisintendedtogiveanoverviewofthetypes ofpropertyandareaswithinLondonthatareperformingwellinterms of increasing in value and long term appeal.

Introduction to the Current Market

The media has been speculating over the future of the prime central London property market, yet, some oftheworldsmostestablishedandreputable international property developers,withthebestresearchdepartments on the planet, continuetobuildinafew select areas.

Some London estate agents have evenbeenquotedassayingnewproperty listings are pricing in the comingimpactofthenew2015 UK capital gains tax, and expect price growthtoslowin2015.

However,lateststatisticsshowadistinctlydifferentstory.Accordingto Halifax UK house prices actually rose at their fastest pace in 8 years in the 3 months to July 2014. From June to July 2014 UK house prices

outperformed Bloomberg survey forecast by 3 times anticipated growth.WhileHalifaxreportsnational prices up 10.2% over the previous year, Zoopla’s index showsLondon prices up 11.72%.

Analysts comment that both confidenceanddemandaregrowing.Improvingeconomicfundamentals, and an end of year selling spree ahead of the capital gains tax deadlines could drive up gains even further. In an August 2014 Bloomberg television report a leading fund manager predicted a UK interest rate increase in early2015,followingonfromaUSfedratehike.Thiswouldprovideeven more motivation for London property buyers to act quickly, aheadofthenewtrendcurve.

Investing in London

Moreexperiencedinvestorsknowthatlocationandqualitywillalwaysbe in demand and International property developers also realise that London has limited space for development and an increasing need for housingunits–whichultimatelykeepsthemarketstrong.

Somenewpropertydevelopmentsaretestingrecordsettinghighsof£10,000persquarefoot.Historyshowsthatfluctuationinpricesoverafivetotenyearperiodwillultimatelyresultinvaluesreboundingtohigherthantheirpreviouslevels,duringwhichrentswillrisesignificantly,addingsuperior yields.

Property investors that can and intend to hold their income producing realestateinvestmentslongterm,will,nodoubt,comeoutahead.

Long Term vs Short Term

The majority of London Boroughs havecontinuedtoperformwellaccording to latest Land Registry figures–seebelowforaselectfewthat are expected to continue to performwellthroughout2014 & 2015.

Thenewestfigureshavereportedannual price rises ranging from the bottom of the scale at 6.1% in the borough of Redbridge, to the top of the scale at 26.2% in the borough of Waltham Forest, both ofwhicharesituatedinnorth-eastLondon. For residential investors it is recommended that research is done to historical house prices alongwiththefollowing:-

• Ensure that there are good transport links into the City and the West End. With so much investment into the Central London in terms of commercial property, some of the best residential opportunities are coming from areas that are in reasonable commuting distance.

• Look for areas that are being invested into or extensions of tube lines (e.g. Northern Line extension).

• If you are looking to invest in buy to let property look out and research areas that are close to universitiesandhospitalswhererentalopportunitiesarealwaysin demand.

• Moreaffordableareasoftenneighbour areas that have shownapreviousriseinproperty prices.

Residential Market

Seebelowfortwoexamplesofareasthatshowgoodsignsoflongerterminvestmentpossibilities:-

Peckham SE15, London Borough of Southwark

• Peckham attracts a good mix of young professionals, couples and families.

• There is an excellent range of schools and open spaces, including Peckham Rye Park and Common.

• It has good transport links to London Bridge, Canada Water, London Victoria and Clapham Junction.

• The area is deemed relatively affordableincomparisontoneighbouring areas like DulwichVillage.

• In most cases, fully modernised, one-bedroomflatsareachievingabove asking price, ideal for investors.

Brixton SW2, London Borough of Lambeth

• There are travel links via Brixton tube station, on the Victorian Line, and Brixton overground station.

• The recent development of Brixton Square by Barratt Homes has attracted interest from a variety of investors.

• Brixton’s trendy food market has influencedtheareasdesirability,appealing to a younger, cooler demographic.

• Youngprofessionals,withhelpfrom the bank of ‘Mum and Dad’, have become the primary buyers in the area.

• Two-bedroomgardenflats,withprices starting at £550,000, are particularly popular amongst these buyers.

How to Invest in Commercial Property

Whilst the average British person may not have deep enough pockets to cover the £1.1 billion askingpriceoftheGherkin,thereareanumberoffinancialproducts available that invest into commercial property. Please refer to our PropertyInvestmentGuidefordetailsof[Property-basedinvestment products]

Investors are attracted to Commercial Property as historically it’s been proved that a tangible asset can often protect investors fromcurrencyfluctuations,andtheunpredictable nature of the stock and commodities markets.

Commercial property includes retail units, shops, shopping centres,warehousesandindustrialunitsandofficespace.Commercialproperty can also include assets related to the leisure industry such as hotels.

When looking into commercial property investors should consider thedifferentsectorsavailable,broadly, most investors look intotheoffice,retailandleisuremarkets. Its good advice to specialiseandfocusyoureffortonone of these sectors.

Anattractiveofficedevelopmentwhichwillofferexcellentyieldhasdifferentqualitiestoagoodinvestment in the retail or leisure industry,thedifferentusesofeachtype of property, and associated factors, make picking one area of specialism early on a good route to take.

Alsobeawarethatgenerallythemarket for all property in London generallysplitsintotwoareas;PrimePropertywhichasthename suggest usually attracts top class tenants in all assets classes. There’s also Secondary and tertiary propertywhichissituatedinlessprimelocations,withhigh-qualitytenantshardertofind.There’sahigher yield available from these sub-primeproperties,astheriskofempty or void periods and defaults is higher.

Although all discerning investors knowtoconducttheirownresearch thoroughly before making investmentswecangivebriefgeneraladviceonwhattolookatinthedifferentsectorsinthecurrent(2014)market;

Commercial Market

Real-estateinvestorsfromAsiaandtheMiddleEastarelininguptobidfortwoofthemostrecognizableofficebuildingsinLondon’sskyline, adding further interest to the U.K. capital’s property boom.

WithintheCentralLondon,thecity’sfinancialdistrict,30St.MaryAxe,widelyknownastheGherkinisbeingdirectlymarketedtodozensofinvestors for about £650 million, or about $1.1 billion, after going into receivership in April.

FurtherdowntheThamesinCanaryWharf,thefinancialdistrictthatsprang up from London’s former shipping docks, HSBC’s HSBA.LN +0.03% global headquarters could become the most expensive single building ever sold in the U.K., if it goes for the marketed £1.1 billion.

Thereareafewfactorsthathaveinvestorsmakinglongterm commitments to the Central London

• TheUK’srobustrecoverytotheglobalfinancialcrisis.

• RecentstatisticsfromMorganshowthatthenumberofjobsavailablein the City is moving higher, up 10% in June from a year earlier.

• From a fundamental perspective, the U.K. looks strong compared withelsewhereinEurope.Thelatestofficialstatisticsshowed unemployment falling to 6.4%. The Bank of England has increased economic-growthforecaststo3.5%forthisyear.

Central London – Commercial Property

WhilstthepreviousownersoftheGherkinhaddefaultedofthe300groupsthathaveregisteredinterestinbuyingtheGherkin,thebulkarefromAsia.“That’swherethere’sthehighestdemand,”Mr.StocksatDeloitte says. “They’relookingtoinvestinsafeassetsinLondon.” Only a portionofthe300areexpectedtoengageinthebiddingprocess,whichwillstartinmid-to-lateSeptember,hesaid.

• Investorspoured£4billionintocentralLondonofficesduringthe second quarter, according to CBRE. Overseas buyers accounted for 69% of that, it said.

• Asianinvestorsaccountedfor33%ofsecond-quartercentral London investment.

• China Life Insurance bought a 70% stake at 10 Upper Bank Street for £541million,andtheChinaConstructionBankGrouppurchased111Old Broad Street for £111 million, CBRE said.

• This marks a shift in the London property market. Overseas investors “arebuyingtheseassetsinaverydifferentwaythanhowthemarketoperatedinthepast,”saidMatthewRichardson,directorofEuropeanreal-estateresearchatFidelityWorldwideInvestment.

- Hesaidthattherecanbedownsidestotheinfluxofforeigncapital,saying that transparency, often touted as a key attraction to the U.K. property market, is fading as overseas investors decide not to contribute information to industry bodies such as Investment Property Databank Ltd. “Our ability to understand the market is decreasing,”hesaid.

Over the last 12 months, increasing interest in London retail destinations has come from brands based outside of the UK. American retailers in particular are keeping demand for London basedretailassetsatanewhigh.

It’s not just clothing brands either, many American restaurant chains includingFiveGuys,the1,000location-strongfastfoodchain,whoopeneditsfirstLondonlocationinLongAcreattheendof2013andisnowrapidlyexpandingacrossGreaterLondonandtheSouthEast.

The UK retail market place is highly competitive and for every Apple thereisaBestBuyorBordersthatfellbythewayside.CentralLondon, is extremely competitive area and prime Zone A rents and business rates can reach staggering levels compared to equivalent space in American cities.

Don’texpectthistoputoffAmericancompaniestryingtocracktheEuropeanmarketwithaflagshipstoreinLondon,butdoexpectthatnotalloftheseventureswillprovefruitful.

This demand from overseas for prime central London retail space is high now,buttheavailabilityofflagshipstorelocationsisatanall-timelow.We’dexpectthesebrandstoalwaysholdoutfortheprimelocationsanddon’t expect to see them opt for less fashionable parts of the capital. We believethatinvestorsinZoneAwillseecontinuedfulloccupancy,andcompetitive rents for the foreseeable future.

Central London – Retail Property

Londonisthebest-performinghotelmarketinEurope.ThisistheflipsidetothepictureintheregionswhereLondonoccupancylevelswouldbemetwithdisbelief.BrandhotelsarepopularwithinvestorsandtravellersintheLondonarea,bothinvestorsandguestsknowwhattoexpect from a brand.

The trend for brands started during the recession and has continued aswegrowintosustainedrecovery.Theimpactofthisonindependenthotels has been felt, and some have struggled as bigger brands bought up struggling competitors and extended their reach across the city.

Brand penetration of the hotel market has long since been a staple in the USA,manycommentatorswisetothismarketbelievethatLondonwillinfuturefollowtheAmericanmodel.

Overallleisurespendinghasincreasedinthelasttwoyears,butaweakenedEuropealwaysremainsathreat.Thereisstillastrongdemandfor high quality and premium hotel and leisure space, and those looking attheprimeendofthemarketshouldbeabletofindgoodreturns.

Central London – Hotel Property

Bonds

Bricks and mortar are only one of the options for investors. Fixed incomepropertybondsarenowavailableandofferhealthyreturnsintheregionof6-10%.Theseareproving an increasingly popular option for discerning investors lookingforlowriskandhighyield.

Bondsofferatraditionalsafeinvestment, and typically they provide a secure income and healthy capital return. In the current market bonds are increasingly become the investment of choice for those looking to take advantage of propertypricegainswithout havingtophysicallyownandmaintain property.

Investment funds

Property investment funds are also gaining in popularity. Before investing in a fund astute investors should note the type of property that the fund is investing in(i.e.commercial,office,retail).Locations of the property held in the portfolio should also be placed under scrutiny.

Otherthingstoconsiderinclude;managementcharges-makesurethese are comparable to other funds. You also need to consider howlongyourinvestmentwill be tied up for.

Differentwaystoinvestin the property market

Simon Morris is an independent property consultant withover15years’experienceinpropertyinvestment.Simonactivelyworkswithanumber offundsandhighnetworthindividuals,advising on property purchases, to ensure investments made into property, are measured in terms of risk, and bring solid return on the initial investment.

About Simon Morris