The residential sector of the London property market has seen a boost in recent months, but not because you or me is keen to buy a house. Buy-to-let landlords have become increasingly active, with lending to this category of investors going up by 10 percent in the last three months.
The numbers are not huge, but they are encouraging. Oversupply of property has led to a drop in rent which has increased demand. This in turn has prompted funders to make money available for residential property, despite the unfavourable tax conditions and regulatory procedures that come with setting up new funds.
It was announced today that a new real estate fund aimed specifically at the buy-to-let segment of the London property market will be launched. Three large British property firms will run the fund, which was started purposefully to capitalise on the apparent landlord enthusiasm.
The CR property fund will initially collect £50 million pounds from investors, but this is set to grow to £300 million. The fund’s management seeks to buy 500 properties for the portfolio and is primarily focusing on houses valued between £500 000 and £800 000.
The launch of the fund has been taken as a vote of confidence in the London property market, and is expected to pique the interest of international investors, because the pound is still weak.
In an interview with Reuters Peter Pereira Gray, managing director of the investment division at UK charity The Wellcome Trust said that although they are still being very cautious in investing, and are making sure to maintain liquidity and flexibility, the trust remains “positive about residential, particularly high-end, prime residential in and around London”.
As with most activity in the London property sector since the recession, these signs of improvement in the residential property sector should not be considered an indicator for the industry as a whole. The market is still very precarious and commercial property still accounts for the dominant portion of property funds in the UK.
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