In your experience, has the pandemic brought about a change of behaviour in HNW property investment choices?
“This is due not only to the volatile market conditions created by the pandemic, but also the Brexit climate that has led to a lot of uncertainty over monetary and tax policies. Real estate is that tangible investment opportunity providing reliable security over a longer period and suiting investors who are looking to diversify from financial investments.
“In addition, the pandemic has prompted many people to move or purchase a second property in the countryside, and the market has benefited as a result. However, our clients tend to have a longer-term vision and are still focused on prime residential property in central London. What has changed is that they are purchasing larger properties than they first anticipated, to meet a new requirement for spacious and flexible working environments and generous terraces or outdoor space.
“The Knight Frank Global Buyer Survey took the views of over 700 clients across 44 countries to find out what they want from a property post Covid-19. Some 45% said they are more likely to buy a detached family home than they were before Covid-19, with 66% saying large gardens are more important. As an illustration of this point, we’re currently revisiting a project in the middle of Mayfair where the client wants to include a roof terrace. It’s significant that this wasn’t even a consideration 12 months ago.”
Is now a good time to invest in real estate or should caution be applied?
“There are a number of factors pertaining to the current climate, however, that make the timing even more ideal. Firstly, interest rates are at a historic low and the pound is weak – and it doesn’t seem likely this will change any time soon. Concurrently, property prices are set to rise and there is the potential for great return over the next five years. This is particularly the case in the prime luxury property market, for example in London, prices are expected to grow 17.5% between 2020 and 2024 (Savills). We are seeing strong demand from our overseas clients who want to take advantage of the market conditions and weak sterling.
“Secondly, the current conditions create opportunities to acquire distressed properties or properties that are suitable for conversion. However, property markets can change drastically from one neighbourhood to the next and selecting the right one will make all the difference in securing the desired return. This is where it is important for investors to have a partner who knows the local market and is looking after their interests. What has become apparent in feasibility studies we’ve conducted in the UK for our clients recently, is that the current market offers some great opportunities for those looking to invest for the mid-to-long term at a more sensible value.
“Earlier this year I read the Knight Frank Wealth Report and the 2020 Prequin Global Private Equity & Venture Capital Annual Report focussed on global investment and asset allocation by family offices. Both concluded that private equity and real estate were the clear winners for investments.”
Which type of real estate investment is proving most popular with your clients at the moment?
“For the former, recent activity in the prime property market has created the perfect condition for clients to acquire real estate in London, and hold onto it as either a development project or for their residence.
“Meanwhile, the concept of branded residences is becoming more and more popular. It has not only enabled luxury brands to create a different business model with the hotel market currently in difficulty, but it also addresses social needs by bringing all the services and amenities of a luxury brand into the comfort of your own home. This is certainly being reinforced with the ongoing pandemic, which is boosting the importance of integrated living and having everything on your doorstep. In fact, all property investment sectors from prime to mid-market are anticipating the fact that the pandemic has changed the way we live, and serviced apartments are one answer to those future needs.”
Has the pandemic changed the level of service some clients are looking for?
“An inevitable result of the restrictions brought about by Covid-19 is that many clients are unable or unwilling to manage property investment projects themselves. As such, we have found an increasing number engaging in our turnkey property investment services. A turnkey property is one that has been completely renovated so it readily finds a buyer, renter or long-term investor to either use or sell it immediately.
“For each turnkey project we are targeting between 10% and 25% profit on cost with a return on investment within 18 to 36 months.
“A great example of this was a central London turnkey development we undertook for an international client. The brief for this project was to reconfigure a two-bedroom Grade II listed apartment. It needed to be carefully modernised so that the design blended seamlessly with the history of the building and additional space created. The apartment sold after only three days on the market and achieved a record price for the area.”
What is the best way for a client to approach a property investment?
“In the current market, expert advice is paramount. Any investor should seek insight from people who know the local market – especially in London where each area has its own specific quirks and trends. It is therefore important to build an expert team of advisors – from structure to tax, to conveyancing and development. Only with such a team in place can investors hope to identify the best properties and adequately assess the potential and risk that will allow them to deliver the project in a timely manner.
“It’s important to stress that timing really is key. All too often, investors search for property before having a team in place. This means when they identify the potential real estate, they miss out on a deal because they are not ready to move forward. Timing is everything, especially in today’s market.”