Prime residential property in London is at tipping point of a recovery, according to the manager of the Prime London Capital fund, who says investors should see the benefits within the next six months.
Stephen Yorke says historical figures indicate prices of homes in central London are set for a v-shaped rise. Between December 1989 and December 1992, Savills Research shows prime London residential property fell 32%. However, in the next two years it rose by 30%.
From September 2007, the peak of the market, until March 2009 prime London property fell 27%. Also during the late 1980s and early 1990s sterling depreciated significantly – as it has done recently.
Yorke says: “Will history repeat itself? What we do know for sure is that recoveries in prime London are v-shaped . The stock tends to be owned by wealthy people and it is unusual for them to sell when prices are low. They tend to sell when the market rises. When demand starts to pick up there will be a supply squeeze – then we will get big moves of 10% or 15%.”
Yorke runs the Prime London Capital fund from D&G Investment Management based in Guernsey. The open-ended vehicle was launched in December 2006 and since then it has built up a portfolio of eight properties, all in the residential sector in prime London, with a gross asset value of £10m.
The fund was launched to give access to smaller investors to this asset class. “Prime real estate has been invested in by the world, there are many international players. But you probably need £1m or more to buy a single unit. This fund was created in a structure that allows people to put a small amount in. The minimum investment is £1,000,” says Yorke.
He adds the fund has not suffered the level of redemptions seen by some commercial property funds which forced groups to suspend dealing as each unit is smaller in price compared to a warehouse or office block.
Yorke adds value to each property through the extension of short leases, refurbishment and letting to a range of AAA tenants from a wide variety of sectors.
The manager says there are other signs that a recovery is imminent. He is encouraged by the level of interest in this area of the property market and points out it offers extra value to overseas investors who can take advantage of the fall in sterling.
“Fluctuations in currency are very important to prime London and currently it is a lot cheaper in foreign currencies.”
He also says the number of transactions have begun to pick up and lots of buyers are registering with estate agents in the past two months.