A recent webinar, kindly hosted by the non-profit, think tank Bridge India, brought the welcome news that it looks like the global pandemic that has caused so much economic upheaval should not discourage investing in UK property, certainly if you’re willing to see it as a long-term proposition.
Bring back Brexit
The online session, entitled “The impact of Covid-19 on Indian investment into UK real estate”, was chaired by Chirag Rao, a real estate lawyer and Senior Associate and Head of India Group at Howard Kennedy LLP, saw a variety of speakers sharing their experiences and predictions about the UK property market.
Back when Brexit was the greyest cloud on the horizon, figures from Knight Frank were showing that in the residential market there had been an 11% year on year rise in the number of Indian home buyers in prime London markets. Manish Karani, Founder and CEO of a multi family office investment vehicle called MVK Group, said that he’d even had a customer saying “Covid has been horrific, could we bring back Brexit?”
Certainly it feels that Covid-19 has come to hit us, just when things were starting to recover from the uncertainty that Brexit brought. Varun Gudka, an Associate at Knight Frank, explained how the General Election had brought some stability back and that had been an upward push on office rents that had led to a good Q1 for 2020. He warned that the difference between this and the last financial crash was that this time health issues would dictate the speed of how soon things might take to recover.
To put things into context Vivek Raghunath, Business Head at Charcoal Concepts, told of how the footfall had dropped dramatically at their restaurant Tamarind Tiger which opened in January this year at Baker Street, London. He said that March saw the number of turns drop from two or three to barely even one.
Moving over to offering food via delivery services was now one avenue to consider, but with the massively higher overheads, sometimes peaking at 50%, this new “normal” was seriously affecting catering businesses. He said how the footfall was vital for firms that run restaurants but sadly it looked like shopping malls would be amongst the last to get back to normal.
Manish concurred that investing in restaurant properties seemed an uncertain risk at the moment, largely because there was no way to know whether there could be another lockdown looming in the near future.
“Valuations are not market leading, they are retrospective”, pointed out Varun. This means that there’s no way to look back to figure out what’s going to happen next. Covid-19 has created a climate in which forecasts are very unreliable at the moment. “We are waiting for transactions to come in, the volume has been down since lockdown,” he said. As the data comes in then the path for the future will become clearer.
Safe as houses
Arya Taware, Founder and CEO of FutureBricks, was more positive, pointing out that there has always been a confidence in bricks and mortar. FutureBricks was launched in order to offer a new way for small- and medium-sized house builders to access finance and they are capable of accepting investments from 110 countries, including India.
Arya said that despite having to make the lending terms stricter, for example having lower LTV (loan to value) percentages, that investors were still getting 8-10% interest, which stacks up very favourably given that historically-low interest rates have all but wiped out many other forms of saving. “It’s a buyers market and cash is king,” she said. She also reported on how FutureBricks had managed to increase its market share over the last eight weeks, primarily because they’ve been open when others haven’t.
“Remember that with property, compared to any other kind of investment trust, it’s long term”, she said. But she thinks that the confidence is back. “I think people are even more keen to deploy their income and savings, because savings are not going to give anything.”
In terms of office properties, Varun pointed out that many people will be working from home for the foreseeable future and it will be up to employers to ascertain how to manage things, including capacity, when workers eventually return to offices. Despite this, there is interest in taking up office space, not immediately perhaps but it’s being planned for. So there won’t be a glut of available office space because everyone is working from home. Prices therefore are unlike to plummet.
Back to normal
Things do seem to be picking up. According to Varun, “there is light at the end of the tunnel. There’s definitely appetite and we are seeing deals being done and the willingness to be done.”
There are likely to be opportunities out there. Manish gave an example of a plot of land they bought three months before Brexit which they built on and managed to make a 12-months exit on. The MVK Group would consider bidding in the next month or so, 20% below market rate to see where it gets them. “We fundamentally believe that there’s a shortage of housing in the UK,” says Manish but warns that like Arya, he believes you should be able to take a long-term view on investing in property.
The outlook is difficult to predict. Varun says he would be “uncomfortable predicting” how things will play out because it relies on the availability of funds, this has been impacted with many stock market firms not paying dividends for the next year. However, he says that the last six weeks have more stable and the last two weeks have seen interest up to a healthy level again. “Try to stay positive,” he says.
You can watch the whole webinar at: https://www.youtube.com/watch?v=Nmf0ualz6WA
Bridge India has more upcoming webinars in its Covid-19 series:
- Indian Higher Education: Has Remote Learning come to stay? (Tuesday 9th June)
- How can India position itself globally relative to an assertive China? (Tuesday 16th June)
- India’s food security in a pandemic (Friday 19th June)
For more information and to sign up go to: https://www.bridgeindia.org.uk/event/our-covid-19-webinar-series/
The webinars can also be watched on Facebook Live: https://www.facebook.com/bridgeindiaorg