Coronavirus impact – is it changing the makeup of overseas investors in the UK?

The ongoing coronavirus pandemic has had a dramatic impact on all of our lives, including those who operate in the property investment market.

Britain has long been a popular location for overseas investors, particularly in major cities such as London, Manchester and Edinburgh. The capital, more than any other destination, is often viewed as a safe haven because of its international standing, cultural prowess and convenient global location.

Here, Santosh Gowda - chairman of the Strawberry Star Group - offers his thoughts on how coronavirus is affecting the UK property investment market.

“We have a range of overseas investors showing interest in our developments at the moment, from countries including Hong Kong, Singapore, China and Dubai. While the majority of them are property investors, there are a few owner-occupiers as well,” he said.

“Property investors include UHNWIs, family offices, trusts, and investment companies. The makeup of our investor market has changed slightly since the lockdown. We are seeing a lot more enquiries for bulk purchases from the UK, Hong Kong and Dubai-based property investors and family institutional investors with the liquidity and capital backing to take more risks and purchase sight unseen.”

He added: “With strong and stable economic and political foundations in the UK, as well as having some of the best universities worldwide, many investors still view London as a safe haven for future returns.”

In recent years, property has been seen as the safest and most reliable asset class, much more so than stocks, shares, bonds or pensions. Is that still the case now?

“The UK residential property as an asset class investment is good compared to bonds, shares and commodities and this is something which we are able to facilitate across our schemes,” Gowda said.

“There is a tendency of retail investors turning now to residential, knowing the high street will take time to recover. If you analyse the performance of all asset class investments, including tech and healthcare stocks at the moment, the projection for residential real estate will provide a much more stable return for investors. While tech and healthcare stocks provide good ROI in the short-term, property, on the contrary, is a long-term game.”

He said investors are aware that we’re not necessarily in a buyers’ market nor a sellers’ one right now – ‘it is simply a frozen market, that will likely bounce back with some pace’. Britain’s strong economic fundamentals and the large amount of pent-up demand will ensure this, he adds.

“The UK property sector has already successfully overcome several challenges in the past decade or so, such as the 2008 recession and, most recently, Brexit. Point to be noted is that although growth slowed down in the UK owing to Brexit, the returns never entered negative territory,” Gowda continued.

“While capital gains in the prime and the super-prime segments have reduced, this has prompted investors to explore the new-build market to strike better deals. Savvy investors are taking advantage of market conditions to invest in new-build prospects, as they are aware that returns in the long-term are guaranteed.”

He points to the personal experience of Strawberry Star in recent times. “Last week, two brothers from Hong Kong were so impressed with our project ‘Lu2on’ that they closed the deal in just two days. Now, some of their friends and relatives are also inquiring about investment options.”

“None of them have visited the site so far, of course, so they’re 100% reliant on our videos, digital marketing and sales information,” Gowda explains. “We provide a complete online portfolio of products – online videos, virtual tours, market commentary and insights. The transaction can happen electronically.”

He added: “They trust that what we are delivering is high-quality and know that our schemes are always strategically located in key regeneration areas with high demand, able to weather an economic storm.”

He said buying virtually has so far seen ‘really positive feedback’, with investors who snap up property online tending to come and visit the project at a much later stage after the transaction, often to coincide with other business meetings they are having. “Buying something unseen in today’s context is a trend that is naturally growing for many of our buyers,” he said.

Gowda said most buyers are specifically exploring markets with high-growth potential, where off-plan developments and new-builds are available. “Commuter towns with fast transport links to Central London are being considered for their better value for money,” he claimed. 

“Developments in regeneration areas with all amenities and facilities under one roof are top of the list, showing particular interest right now in Build-to-Rent (BTR) projects as demand in this sector grows. Their investment ranges from a few million up to £10 million, depending on the nature of the project that they are interested in.”

He concluded: “Some of them even want to partner with us as a joint venture where investments are higher. They are interested in bulk deals, block sales, underwriting of schemes and BTR, so the investment level varies.”

Strawberry Star is also doing its bit to help in the fight against Covid-19. The property firm, which has developments in Luton, Wandsworth and Harlow, has donated 800 N-90 quality protective masks to NHS West Essex as well as a number of residential care homes across Newham and Havering.

As part of its ongoing initiatives to support local communities, Strawberry Star recognised the priority for increased PPE to help keep frontline doctors, healthcare workers and volunteers safe as they continue to fight the spread of the deadly Covid-19 disease.

“We are aware that Covid-19 has increased the burden of our healthcare network immensely,” Gowda said. “These are extremely difficult and challenging times for frontline staff, who are at the greatest risk of contracting the virus. We wanted to extend our support to them by donating protective masks.”

He added: “We know that N-90 masks are widely used beyond hospitals, by volunteers and care givers too, so we could see the potential to support the broader network of frontline key workers, such as those looking after the elderly.”

Strawberry Star reached out to local hospitals and donated 400 N-90 face masks to the NHS in Epping, which will be used at St. Margaret’s Hospital and other local clinics in their network, while another 400 masks were donated to Newham and Havering Councils. The local authorities will be using them in multiple locations to support the most vulnerable, including residential care homes.

“We will continue to extend support to our healthcare workers and would encourage other businesses to do the same where possible,” Gowda said. “This is the time for everyone in every community to step up and support our NHS heroes.”