As is always the case in times of crisis, people are asking what might follow, what industries might thrive as normal life slowly returns in some form, and where the investment opportunities might be.
Here, we interview Reece Mennie - the founder and chief executive of HJ Collection - for his thoughts on why alternative property investment might soar, why his firm is focusing on the North of England and how Covid-19 will impact the property market long-term.
What do you mean when you talk about alternative property investment?
Alternative property investment is when a high net worth or sophisticated individual chooses to invest in an asset-backed property bond or fund, used to build or refurbish usually large-scale developments, as opposed to direct physical bricks and mortar.
In doing so, the investor does not have the hassle of managing tenants and the assets themselves whilst spreading their risk over multiple properties and typically receiving a greater fixed return when compared to investing in individual buy-to-let properties.
Why has your focus so far been on the North of England, and in particular more 'unfashionable' locations in Yorkshire?
A lot of the regions in the North of England require regeneration, providing an excellent opportunity for developers to purchase sites at an appealing price point.
Once developed and ready for sale or refinancing, there is significant demand for property in both a BTR and BTL capacity, meaning both the occupancy and returns for investors is high.
Is the January 2021 target for your Yorkshire House development in Barnsley a realistic one?
Certainly. We always provide longer development timeframes for our investors to ensure we meet the promised deadline.
Coronavirus is (for obvious reasons) the only story in town at present, but before the crisis environmental concerns were top of the news agenda. Do you consider things like sustainability, energy efficiency and green features when developing projects?
Yes, of course. We incorporate several features to improve energy efficiency, including solar panels, energy-efficient heating and hot water storage, together with rainwater harvesting and energy-efficient LED lighting which is controlled by movement sensors.
We also install bio-mass boilers and are looking into air source and ground source heating systems.
How do you think Covid-19 will impact the UK property market long-term?
Ultimately, Covid-19 will have a long-term impact across many industry sectors, including the UK property market.
However, it’s important to remember that this period is temporary and there is still a demand for housing across the UK. As a result, investors, in particular, should view this current period of economic decline as an opportunity to invest in sites at a lower and more appealing rate.
How do you think the UK property market could recover and when?
I think this ultimately depends on how long the lockdown will last. However, we have seen positive signs over the last few weeks with hints at restrictive measures easing come the beginning of June. With that in mind, I think the UK property market will start to pick up towards the end of 2020, with house prices rising again by the beginning of next year.
In contrast, I predict that the alternative property investment sector will bounce back sooner, as developers take advantage of the economic dip in purchasing assets at a lower cost, providing a greater opportunity for high net worth and individual investors in the long-term.
How will large-scale property developments be impacted and what will this mean for alternative property investors?
Although devastating, the pandemic will create a buyer’s market, enabling switched-on developers to purchase assets at a lower rate and then profit months or years down the line as the market recovers.
It is important to note that individual investors who have committed funds to professionally researched and proven alternative investment opportunities should not be impacted, as their investment is on a fixed return basis, delivered over a fixed timeframe.
Will things like virtual viewings and transactions completed entirely online become the norm in the future?
I think a lot more people will certainly use things like virtual viewings, particularly for the foreseeable future as we navigate through the pandemic and start to rebuild some normality.
However, I still think people will like to physically see and walk round a property that they are looking to purchase, so even though virtual viewings may be used initially, it may not be relied on for the entire process, long-term.
What convinced you to launch HJ Collection last year?
Over the past eight years, we have worked hard to establish close working relationships with several quality property developers to ensure we deliver the best possible investment opportunities for our clients.
In doing so, we not only have a unique insight into sourcing top locations for new sites but also, in understanding what will provide our investors with the best returns.
As a result, we took our working relationship with one of our developers, Empire Property Concepts, to a new level and are now in the process of developing three new sites in attractive locations in northern regions of the UK under the HJ Collection umbrella.