22 March 2024

Last week I visited multiple development sites in London, Manchester and Birmingham, and spoken to a number of local developers to have a first hand view of what is happening in the UK residential sector.

If you are looking at this sector, I thought it might be useful to share my impressions (and few pics). Happy to meet in person or arrange a call if you wish to discuss in more details.

Housing shortage

This is an election year in the UK, and Housing is a big topic. In general, there is little understanding within the general public as to why property prices have increased so much in the UK to the point that they have become unaffordable to the majority of new buyers.

I remember when I was living in Stratford, London in the ’90s that it was possible to buy a terraced two bedroom house for £24,000 (less if it required renovation). Today one would be lucky to buy that same property for less than £400,000.

In a world of “fiat money”, where central banks continue to expand the monetary base and the banking system continues to create credit (in this case by making available mortgages with 90-95% LTV), it is inevitable that house inflation will appear.
And there is no sign that this is going to change, with some proposals for 99% LTV mortgages floating around (then withdrawn).

Add to this, that the population of the UK continues to growth (not only through immigration which BREXIT has not stopped), and the only solution to this issue is to build more houses. But where?

Let’s see what I found out.

London – Kingston upon Thames

I visited a place called Kingston upon Thames, which is one of the borough of London where our Long Income Fund is invested in a Travelodge hotel.

Since I was there, I took the opportunity to walk around which (as the name says) is right upon the river Thames, a magnet of “brownfield” regeneration over the last 30 years.

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I wasn’t surprised to see the usual contrast of old terraced houses and new waterside apartments with lovely canals and a very pleasant promenade along the river which must be very appealing to young professionals who didn’t make it in the first way of development of “canal-side” living. Lot’s to demolish and rebuild in this part of London.

Also an excellent area for our Built to Rent strategy, given the good rail connection to the Centre and relative affordability of rents versus central London.

Whilst there, this news caught my attention:

RER London has launched the sale of the former Surrey Country Hall, a Grade II-listed building, after obtaining approval for a £250m redevelopment. The company, owned by Tim Farrow, bought the site in 2021 and has plans to convert it into a residential-led, mixed-use scheme with around 350 homes. The building, which sits on a 5.2-acre site, is being marketed by Levy Real Estate and Savills.Surrey County Council sold its former headquarters to RER in 2021 for over £20m.

Nice upside for the developer 🙂

London – Chancery Lane/Commercial Street

Next day I checked in at our latest addition of our UK Multifamily Portfolio, a block of 14 luxury flats managed by Viridian Apartments. To make sure I had the best views, I checked in apartment 14, 116-118 Chancery lane, which has an amazing rooftop terrace, overlooking King’s College.

If you ever visit London, let me know and I will see whether we can book you here.

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Serviced Apartments are a very cyclical business, with the Jan-Mar period one of the worse (hence why I could easily check in at Chancery Lane). Hopefully, from next month, things will start to improve as they usually do in Spring and Summer.

Our colleagues at Viridian Apartments (which I am happy to report has now been fully acquired by our UK Multifamily Fund) never stop looking at ways to improve our portfolio. Whilst there, they were working on a new 38 units block in Commercial Road (here is my colleague Anna and her team making sure that this property looks stunning).

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Whilst there, we shared an iftar with our Cur8 Capital partners at Lahore Kebab House which brought me memories of my days living in East London. What a change this area of London has undergone! And how much more to develop!

East London and the South Bank of the river Thames was historically one of the least desirable areas of London (I ended up there because I was working for JP Morgan at that time, and for some reason the bank had an office within the Stratford Shopping Centre, go figure).

As such, I saw with my own eyes how century old abandoned industrial revolution era warehouses, Victorian river docks and Council government estates were progressively transformed in desirable places to live, work and play (just think of Canary Wharf, the South Bank etc).

And the process continues to this day, with the City continuing to expand east-wards, encroaching in the old estates of Brick Lane, Whitechapel and Commercial Road.

Plenty of opportunities here.

Manchester

Next day I moved to Manchester to visit some new sites where we would like to acquire. It is the second time I am visiting the city in the last 6 months, so I was not surprised as much as I was last August.

During the Covid pandemic, the local municipality had the brilliant idea to relax planning permissions and let developers construct high rise buildings. Today, Manchester is quickly transforming into a modern city, attracting young talent (or better retaining them, since they have some of the top universities in the Country). Even Goldman Sachs has opened an office here.

Whilst there I stayed at a small hotel owned by one of the investors in our UK Multifamily Fund to explore the possibility of demolishing and rebuilding a 40 stories tower on the site.

I also went to see an area called Salford Quay, which looks very much like the Docklands in East London and has witnessed a remarkable wave of residential developments.

Our Long Income Fund for a while invested in the freehold of this property benefiting from a 250 years ground rent.

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What is remarkable, is that in this city there still so many derelict buildings like the one below just waiting to be demolished and rebuilt. Like this one in Devonshire Street.

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Birmingham 

My final stop before returning to Dubai was Birmingham.

The city is a bit behind Manchester in its regeneration, but on a good path. It does not help that the local municipality went bankrupt as a result of a labour dispute. In fact, as I was inspecting few sites I passed near the City Council building and I saw movers and packers taking away furniture before the building itself is sold to be demolished and converted in a new residential high rise building.

Something which I found remarkable is how many student housing blocks have been developed here.

We have been investing in the student housing sector for few years and are quite aware of the risks. Essentially, the Government has capped the fees that Universities can charge to UK students, without providing necessary funding to the educational institutions.

In response, UK universities have aggressively opened up to foreign students, which has required an improvement of the quality of student housing (now essentially a hotel room). The Chinese contingent is quite numerous, and primarily located in the Chinatown area.

Being in an election year, and in the midst of a shift of geo-political equilibria, any move by the Government to limit the number of study visa, the ability of foreign students to bring their parents or of staying in the Country to look for a job, will be detrimental to the sector.

Nevertheless, the vast majority of students are British and their number is set to increase for the next 10 years due to a specific demographic pattern.

The most impressive property I saw right in the middle of town. 1000 rooms fully occupied, flanked by other fully occupied developments owned by the like of Unite Students etc.

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And in the background, a high rise residential tower part of the changing landscape of the city.

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Fan fact

Including site visits to our commercial properties, I visited 6 cities in 7 days, driving about 1000 km.

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Chancery Lane

Westminster, London

A boutique development of 14 residential apartments located in the prestigious legal district in Central London.

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