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| London Update November 2007 From the Editor There has been much press coverage recently focusing on the credit crunch, Northern Rock, and the general state of the economy and housing market, but it can be difficult to reach a firm conclusion from so many mixed messages. In our newsletter we aim to be objective and unbiased, so have decided to let the facts speak for themselves. I hope you find the information useful and thought provoking.
Funding in Place for Wandsworth's Ram Site Ambitious plans for the regeneration of the former Ram Brewery in Wandsworth moved a step nearer this month. The developer, Minerva, has secured project financing and built the cash reserves necessary to take the project forward. Minerva has confirmed that it will lodge a detailed planning application for the 16.5 acre site, which was bought in August last year for £69 million, before the end of the year.
It is expected that the plans will include 1 million sq ft of housing and commercial space, centred on two skyscrapers of 39 and 29 storeys that are set to dramatically transform the Southside skyline. The project will see the listed brewery buildings preserved and a low-rise residential development featuring 700 flats, shops, restaurants and cafes overlooking the River Wandle. The project is being watched closely by those with local interests as the scale of the regeneration plans is set to have a huge impact on Wandsworth, Earlsfield and Southfields. Wood Wharf Masterplan Unveiled A major new scheme to extend Canary Wharf was unveiled this month as details of the proposals went on show for the first time. If the development, designed by Richard Rogers, gets the go ahead it will be the highest density building project in London. The vision is for a group of towers with 1,400 flats, as well as almost five million sq ft of office space, to cater for 20,000 more jobs, on a 17.5 acre site east of Canary Wharf, facing the O2. The heights of the office and residential towers have not yet been finalized, but none will be taller than 1 Canada Square. Plans include a new community park, improved access to the local docks with waterfront recreational areas, additional moorings and a new canal. If the plans get approval, Wood Wharf will become a city within a city, featuring a new high street running through the heart of the development with shops, cafes and restaurants. In addition to the area's well documented status as the world's leading finance capital, one of the main attractions that brought the development team to the area is the exceptional public transport links that Canary Wharf offers. In addition to the Docklands Light Railway, the Jubilee Line underground connects Canary Wharf to the West End, the Olympic site and to high-speed trains to Paris and Brussels (through Stratford). City Airport is on the doorstep and long-haul international routes are easily accessible through convenient connections to Stansted and Heathrow airports. Furthermore, the area's connectivity is set to be further enhanced by major infrastructure projects such as The East London Line extension and Crossrail. St Pancras International Unveiled November 14 saw the opening of Eurostar rail services from the newly refurbished St Pancras International station, marking the completion after 9 years of the £5.8 billion High Speed 1 (HS1) link from London to the Channel Tunnel. St Pancras was chosen as the international terminus in part because it is a few minutes' walk from King's Cross station which has connections to Edinburgh, Newcastle and the east coast as well as six London Underground lines. The new rail link to the Channel Tunnel was as much about regeneration as speeding up journey times, a government proviso made in return for grants and financial backing. New stations have been built at Ebbsfleet in Kent and Stratford in East London, as well as a massive regeneration project, Stratford City. Stratford International station was completed in 2006 but will not open to the public until 2009, when High Speed 1 Southeastern domestic services are due to begin. The new station is surrounded by the construction of the Olympic Park and Stratford City. Less well publicised is the fact that the area’s Thameslink service is also undergoing a major revamp. The ageing Thameslink station opposite King's Cross will close on 8 December 2007 and the service will then use St Pancras station, which has been accommodated by a network of new tunnels that have been built alongside the HS1 as part of the ongoing £3.5 billion Thameslink programme to upgrade and enlarge the whole line. Olympic Stadium Plans Revealed Earlier this month, the Olympic Delivery Authority (ODA) revealed the design for the £496 million Olympic Stadium to be built in Stratford, east London. The design features a 'stadium bowl' holding 25,000 permanent seats, surrounded by 55,000 temporary seats that will be removed after the 2012 Games.
The Newly Unveiled Plans for the Olympic Stadium Work on the 80,000-seater stadium will begin three months ahead of schedule in April 2008 and completion of the venue is scheduled for at least six months ahead of the opening ceremony in July 2012 to allow for test events to take place. The venue is currently seeking a post-Games tenant, and is in discussion with Leyton Orient football club and the London Wasps rugby team. Balancing Interest Rates and Inflation The Bank of England's Monetary Policy Committee (MPC) voted 7-2 to keep interest rates steady at 5.75% in November. Meanwhile, the Bank of England (BoE) November inflation report indicated that the MPC will need to make two interest rate cuts next year in order to halt an economic slowdown. The report showed that inflation would fall well below its 2% target in two years' time if UK interest rates were held at 5.75%, but would be on target if rates were cut twice during 2008. BoE governor Mervyn King commented that making decisions on interest rates would be increasingly difficult over the coming months with the important question being whether "the slowing we expect to see, or we're going to see, [is] bigger than the slowing that we have wanted to see." As predicted in our October newsletter,
the Office for National Statistics announced that the CPI rate for October
jumped from 1.9% to 2.1% as a result of higher fuel and food prices.
The BoE report says that the rate of inflation is likely to rise further
next year, but would subside again to the target rate in 2009. London Still Top Finance Centre London has once again triumphed, taking top spot in the half-yearly Global Financial Centres Index (GFCI2). The report rates the competitiveness of the world's top 50 financial centres and rates London and New York as the only two truly global financial centres, well ahead of the two Asian centres of Hong Kong (3rd place) and Singapore (4th place). Zurich is in 5th place; just ahead of Frankfurt, home of the European Central Bank. Michael Snyder, Chairman of Policy and Resources at the City of London Corporation which represents UK financial services, said; "The UK's 2% cut in corporation tax shows the government is committed to improving conditions for business. This enhances London's position against our closest competitor, New York." London's consistently high rankings in such reports is reflected in the fact that foreign direct investment into the capital has risen significantly over the past year. According to Think London, the capital's foreign direct investment agency, the last six months saw a 12% increase in companies locating to London from Europe, Asia Pacific and the Americas, compared to the same period of the previous year, creating a net 52% increase in jobs. Investor Confidence Remains High According to latest figures from the National Landlords Association (NLA), Landlords appear to be taking a long term view of their portfolios and continue to have confidence in the strength of the sector. Over the next five years, 82% of landlords in the UK plan to maintain or expand their property portfolios. Record Demand Drives the Rental Market The highest level of tenant demand for five years is driving an increase in rents, according to the Association of Residential Letting Agents (ARLA). In its latest quarterly survey of member letting agents, ARLA said that in central London, demand has risen by thirteen times over the past five years. "This peak in demand should come as no surprise," said Ian Potter, Head of Operations for ARLA. "It has been driven by the competing demands for rental accommodation. Softening in the sales market is always a driver of further demand in the rental market." As a consequence, ARLA reports that there has been an increase in achievable rent levels over the last six months on all types of rented property, the highest of which is reported in Central London, where 72% of agents are seeing increases. The average time that properties remain empty has also dropped from five weeks to less than four. London Market Leaves UK Behind The latest house price index from Rightmove mirrors ARLA's findings that the divide between London and non-London property is widening. The latest Rightmove figures reveal that London remains one of the most attractive areas of the UK for landlords. The potential for capital appreciation is stronger in the capital than anywhere else in the UK, with house prices across London having risen by an average of 2.3% during November. This compares with an overall fall of 0.7% in England and Wales. Constricted supply is playing an important role in ensuring that London's housing market remains healthy. Mortgage Lending Still Strong Far from turning their backs on the buy-to-let market since the credit crunch, lenders are still very much pursuing business in the sector, although more cautiously than before. Jessica Hodgson, Young Finance consultant, points out that decisions on applications are taking longer to come through. "There are definitely still favourable mortgage deals available, but what I'm finding is that lenders are now slightly more cautious and taking longer to carry out due diligence on applications. Whilst this isn't a problem for our clients, who aren't seeking sub-prime loans, it means that the process of securing funds isn't as rapid as it had been prior to the credit crunch." Clients who have investment properties completing next year at Westgate, The Water Gardens and My BASE1 are urged to ensure that they begin investigating their finance options well in advance of completion. The Building Society Association echoes the view that residential investment will continue to generate wealth. "It is all about the lenders making sure they lend to people that have done their sums," advised Neil Johnson, policy manager at the BSA. Demand for Canary Wharf Offices Canary Wharf has been identified as the Best European Office Market, where rents are most likely to rise, by Moody's Investor Services. The district had a vacancy rate of 0.5% out of 7.9 million sq ft, equivalent to less than 40,000 sq ft, in its completed buildings at the end of June 2007. Another 1.3 million sq ft of space that is currently under construction is already leased. The report covers markets from 24 European cities, ranking their appeal with regard to commercial mortgage-backed securities. London's Docklands achieved the highest rating of 86%. Glasgow and Edinburgh had the best ratings after London's Docklands, followed by Madrid, the La Defense district of Paris and London's West End, which charges the highest rents per square foot in the world. Dublin was bottom this year with a score of zero. YOUNG GROUP'S NOVEMBER HIGHLIGHTS Fraser Matthews, Portfolio Manager Fraser Matthews has joined Young Group as a Portfolio Manager, following four years as a Private Client Manager with the Bank of Scotland Investment Service. During this time Fraser advised high-net-worth clients on investment strategies and tax mitigation.
At Young Group, Fraser is responsible for advising and assisting clients with their investment decisions and building portfolios aligned to their medium/long term strategy. Development Fund Update Iain Macgregor, Managing Director, Young Property, comments: "Things are continuing to move forward on all fronts of the development fund. We have identified two sites that we believe represent significant value to investors within the target area of East London and are awaiting responses from the vendors. We are currently working with a number of third party consultants to mitigate the planning risks at these sites." Institutional proposals for senior and mezzanine debt finance are being considered and we are analysing legal and tax structures for equity investment in the fund. Clients that registered an interest by emailing their contact details to fund@younggroup.co.uk will receive advanced notification of the fund opening. Far Eastern Promise At the beginning of November, Portfolio Director, David Mackenzie and Chief Executive, Neil Young embarked on a tour of the Far East, taking in Singapore, Hong Kong, Kuala Lumpur and Tokyo; meeting clients face-to-face to catch up on their portfolios and talk frankly and openly to give a true analysis of the current market - something that overseas investors can't always get through the media or remote research. David Mackenzie, commented: "We found that sentiment was very positive. Investors in the Far East view London favourably due to its continued growth as the world's leading financial centre. They also appreciate the underlying fundamentals that drive the capital's property market and take a long term view with regard to property investments." A common theme overseas is the desire to move away from US dollar pegged investments to more stable currencies such as Euro and Sterling-based assets. This is particularly noticeable in China, with the government moving away from its reliance on the US dollar as its foreign currency reserves. Bond Noel This year's 'Bond Girl' who had the honour of illuminating Bond Street for the festive season was model and author, Sophie Dahl. The switching on ceremony was part of a full evening of entertainment in aid of Great Ormond Street Children's Hospital, which saw Bond Street transformed into a wintry wonderland, complete with falling snow, reindeer, jugglers, stilt-walkers, carol singers, musicians and rickshaw sleighs. Young Group's Premier Clients were invited to join us for the evening. Clients shared in glasses of Christmas punch and canapés, whilst chatting to fellow investors and catching up with the Young Group team - before heading onto the famous shopping street to bag a Christmas present or two! New Website
Some of you may already have noticed the new look Young Group website, which has been developed to mirror our new corporate brochure. The website explains more about our firm and philosophy, as well as how our Property Portfolio Management service is delivered. In addition to sharing the passion that we have for London property, on the website you will also find details of all our investment opportunities, latest news and market commentary. We hope you enjoy the new look website and find it informative and intuitive. Young Group specialises in providing Property Portfolio Management services to private investors, identifying the best off-plan opportunities in London on their behalf and managing the entire investment process - from sourcing the property through to financing, furnishing and letting. Young Group is a wealth manager with a focus on property as an asset class. Young Group owns all the property it sells, and also retains a number of properties in each development for its own portfolio. As the principal in every transaction, Young Group does not realise any profits until completion, giving investors 100% confidence that properties will ‘value up’ and that financing will be secured. Young Group has transacted in excess of 1,500 apartments, with a retail value of £630 million. Over 50% of units have been bought by multiple investors. The Group’s lettings division, Young Lettings, has successfully let all investors’ apartments within a week of completion. For each property exchange, Young Group
donates £50 to CHILDREN with LEUKAEMIA, the UK’s leading
charity dedicated exclusively to fighting Britain's biggest childhood
cancer through pioneering research, new treatment and support of children
with Leukaemia and their families, and to Norwood, the Children and
Families First charity which provides support to families facing social
difficulties. t: +44 (0)845 356 1000 e: info@younggroup.co.uk |
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