Earlier this month we were in the Middle East to meet new investors. One theme that kept coming up was how Brexit is impacting the property market in the UK.
Generally we find that investors are split into two camps. There are those that worry about Brexit and are reducing their exposure to UK property as a result. There are others however that see this as a huge buying opportunity. As Warren Buffett famously said “be greedy when others are fearful and fearful when others are greedy.” Right now there is fear in the air and frankly it presents some of the best opportunities of our lifetime.
Many property investors and developers will have noticed that over the past few years there has been a lot of money thrown into property even when it does not make rational sense. These people, with more money than sense, inflate the price of development sites for example. Now however, we are seeing sites priced much more sensibly.
Our view on Brexit is very simple. As long as you are focused on the part of the market that has the highest demand, you minimise your risk. Picture property demand like a pyramid. There are lots of buyers at the lower end and only a few buyers at the top. We like to focus our attention on the bottom one third of the pyramid. i.e. the affordable parts of the market. This is the part the government themselves are supporting. Also every graduate since 2007 has been wanting to get onto the property ladder, and there is a huge amount of pent-up demand. So as long as you have sensibly priced units that young and first time buyers can afford (perhaps with the help of the Help To Buy scheme) then you should be fine.
As a business we are certainly seeing more profitable development opportunities presented to us and opportunistic investors stepping forward to provide the funding. While foreign direct investment in luxury properties may have died out, there is still significant interest in purchasing rental blocks, commercial buildings and residential based commercial buildings such as hotels, PRS, co-living and senior living. That’s where we are focussing.
In years to come people will look back at this period and it will be clear to see those that saw the business opportunities in the current environment and those that did not. Whether you voted for Brexit or not, we are where we are and business must continue. So let’s make sure we focus on the huge opportunities rather than withdrawing into our shells.