Homes finder Garrington says it is experiencing hugely increased interest from investors looking to buy residential property. They look for returns, but care less about rent than they do about capital appreciation.
Garrington says it has had a 54% rise in investment inquiries compared with a year ago, with the rise particularly notable in, but not restricted to, London. Some buyers have never been in the property market before, despite being experienced investors and traders.
Garrington also says that there is increasing interest from these wealthy, cash-rich buyers to use mortgages in order to maximise their purchasing power.
It says one overseas buyer with £650,000 to invest used buy-to-let mortgage finance to gear his investment so that instead of purchasing one apartment in cash, he has now managed to purchase three properties priced at around £500,000 each.
Instead of achieving a 9% return on a £650,000 cash investment, by using mortgage finance and allowing for the mortgage repayments he is expecting to achieve over 20% on £1.5m-worth of property.
Nicholas Finn, London director of Garrington, said: "There is undeniably a surge in the number of investors looking to start, or add to, their London property investment portfolio. They have become disillusioned by other asset classes and have been biding their time before coming back into purchasing London property again.
ìTypically they are sophisticated investors who already have a high net worth and income. From a tax liability perspective, their primary focus is the capital gains available in the London market rather than yield.
ìHowever, as long as that yield is sufficient to service the debt, investors are able to leverage, therefore achieving higher gains from a higher value portfolio. Rightly, they see property as a true asset class.”
But if capital appreciation is the real goal of these investors, what of the Chancellor’s latest plans? See next story.
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