The Compelling Case for International Private Investors in UK Residential Properties

January 2024

The UK residential property market is an asset class which deserves relevance in the portfolio of international investors in search of income diversification and capital preservation. In this article, we explore the underlying reasons of this sector overweight and discuss efficient access strategies.

Long Track Record of Steady Growth:

The UK residential property market boasts a remarkable history of steady growth dating back to the early ‘70s. Over the past five decades, property values have experienced consistent appreciation, providing investors with reliable returns. This long-term track record offers a sense of stability and assurance for international private investors looking for sustainable growth in their portfolios.

The chart below shows the growth of the average house price in the UK which rose from around £3,700 in the early ‘70s to almost £300,000 at present.

Imagine placing that same amount on a bank deposit to receive interest instead of buying a property to collect rent. Fast forward 50 years, and the purchasing power of the bank deposit would have been completely erased.

Another way to measure how well an asset class has been able to preserve purchasing power is to compare its performance versus a price index.

The chart below compares the value of an average house price in the UK with the UK Retail Price Index demonstrating that investors saw a relative enhancement of their purchasing power over the period.

One of the most significant indicators of a robust investment is its ability to weather economic storms. The UK residential property market has demonstrated remarkable resilience during various financial crises, including in the aftermath of the global financial downturn of 2008 when the value of UK residential properties demonstrated their ability to recover the previous peak recorded in 2007 and reach new heights by 2014.

Reliable Source of Income

Whilst the dream of owning a house is ever present, more than 20 million people in the UK live in rental accommodation, either private rented sector or social housing (1).

Demand of rental properties generates a reliable source of income for property owners, which unlike fixed income instruments, keeps growing over time.

The chart below shows how the rental index grew relentlessly over the last 20 years, despite the periodic recessions experienced by the UK economies.

Shortage of Supply

The reason of this growth is to be found in the shortage of housing in the UK, where permits to construct new homes fall far short of demand (2). There simply aren’t enough homes available to meet the growing demand. There were approximately 25 million homes in 2021 (3). The government has pledged to build 180,000 new, affordable homes by 2026 (4), but according to the National Housing Federation, there are around 8.5 million people with some kind of unmet housing need (5).

This imbalance between supply and demand has led to higher house prices and an increase in rental costs. The cause of the insufficient housing supply can be attributed to factors such as strict planning regulations, slow construction rates, staffing and budget cuts in local councils and the scarcity of available land for development (6).

References:

1. English Housing Survey
2. Housebuilding crisis
3. Number of housing units in England
4. Housebuilding crisis
5. People in housing need
6. UK housing shortage
We are here to help:

Rasmala Investment Bank has over 2 decades of experience investing in the UK residential sector and leverages on the expertise of a London-heaquarted team managing over 500 residential units across the Country. We are able to help private investors at all stages of the decision-making process to invest in the UK residential sector, from initial stages of acquiring land, through construction, renovation, conversion and property management. We offer pooled investment vehicle and separate accounts to meet the requirements of investors interested in making financial or more significant strategic investments.

For more information, please visit our websites or contact us.

www.viridianapartments.com
www.muraliving.com
www.rasmala.com

Contact:

Ruggiero Lomonaco
Head of Real Estate Funds
ruggiero.lomonaco@rasmala.com

Dominic Sherry
CEO – Viridian Apartments
dominic.sherry@viridianapartments.com

Disclaimer:

This document is prepared by Rasmala Investment Bank Limited (“RIBL”). This document is not for distribution to the general public but for intended recipients only and may not be published, circulated, reproduced or distributed in whole or part to any other person without the written consent of RIBL. RIBL is regulated by the Dubai Financial Services Authority (“DFSA”). RIBL products or services are only made available to customers who RIBL is satisfied meet the regulatory criteria to be a ” Professional Client”, as defined under the Rules and Regulations of the Dubai International Financial Centre (“DIFC”).This document is provided for information purposes only. It does not constitute a solicitation, recommendation or offer to buy or sell any specific investment product or subscribe to any specific investment management or advisory service. While the statements contained in this presentation have been carefully developed, represent Rasmala’s views, and have been arrived at on the basis of the best information available at the date thereof, they have not been subjected to independent verification, and no representations or warranties are made as to the accuracy or completeness of such statements. Therefore, parties associated with the preparation of this presentation shall have no liability for any statements, opinions, information or matters (express or implied) arising out of, contained in, or derived from, or for any omissions from, or any errors in, this presentation or any other written or oral communications to the recipient in relation to the matters therein. This presentation should be read in conjunction with any subsequent or other materials prepared by Rasmala in relation to the matters discussed herein. All such materials, including this presentation, shall be subject to amendment without notice. This information, including any expression of opinion, has been obtained from or is based upon sources believed to be reliable, and is believed to be fair and not misleading. Any opinion or estimate contained in this material is subject to change without notice. Calculations are based on the most recent data available from underlying sources. Neither RIBL nor any of its directors or employees give any representation or warranty as to the reliability, accuracy, timeliness or completeness of the information, nor do they accept any responsibility arising in any way (including by negligence) for errors in or omissions from the information. Rasmala and its respective employees, directors and officers shall not be responsible or liable for any liabilities, damages, losses, claims, causes of action, or proceedings (including without limitation indirect, consequential, special, incidental, or punitive damages) arising out of or in connection with the use of this presentation or any errors or omissions in its content. Certain information contained in this presentation constitutes “forward-looking statements”, which can be identified by the use of forward-looking terminology such as “expected”, “projected”, “intended” “estimated” “probability” “potential” “outlook”, “believed” or the negative thereof or other variations or comparable terminology . Due to various risks and uncertainties, actual events or results or the actual performance may differ materially from those reflected or contemplated in such forward-looking statements.