All eyes turn to the regions after prime London property hits its ceiling yields
It turns out, if you are looking to make a good investment in residential property, the yields in prime London no longer make sense, says Christine Murray
Mipim can be unpleasant. Hordes of white men in suits drinking for three days straight isn’t my idea of a good time, especially after about 11pm, when the only other women on the streets of Cannes are prostitutes or trophy mistresses flown out for the occasion.
But I go because among the crowds there are smart industry players, new contacts or colleagues that I don’t see often enough and with a week at our disposal we have time over breakfast, lunch, drinks or dinner to talk about business, the shape of the industry, and predictions for the year to come.
My ambition for MIPIM is to speak to as many movers and shakers as I can in three days, to capture the zeitgeist and understand the forces that will be acting on the property world over the next 12 months.
Last year the message was clear: foreign capital was looking for a safe place to hide and would be investing heavily in the safe port of London, but only in ‘risk-free’ prime locations. What I wrote in March 2012 - ‘The eurozone crisis has been good for the capital’ - broadly came true:
This year, in a remarkable twist, there was talk of investment in the regions. We thought it optimistic; and hardly believed it ourselves at first. But it turns out, if you are looking to make a good investment in residential property, the yields in prime London no longer make sense. All that foreign capital pouring into prime locations has driven the prices up.
‘The safety of prime London assets has now been more than offset by over-strong pricing for many investors,’ said Adam Challis, head of residential research at Jones Lang LaSalle. And Robert M Noel, chief executive of Land Securities, agreed: ‘We’re investing in the regions,’ he said, and name-checked schemes in Leeds, Glasgow, Crawley, Taplow and Oxford.
Who are the buyers? I had heard from Peter Murray that a couple of Americans investors were sniffing around, but Mark Farmer, head of residential at EC Harris claims Chinese buyers are, too. He said: ‘There is a clear increase in attention from the emerging middle-class mainland Chinese market. They are looking at certain regional residential locations, where they can get good value compared with the hotter London residential market.’
At MIPIM several UK cities had set out their stalls, from Bath and Bristol, to Birmingham, Leeds region and Manchester. Amanda Lowe, spokesperson for Marketing Birmingham, said there was ‘certainly more interest’ in their stand at MIPIM this year. ‘A lot of investors were looking outside London for the first time and they wanted to know a bit more about the long-term plans,’ she said.
As for the AJ, we’re looking to the regions, too. We’ve already increased our nationwide coverage, with dedicated news websites for each region, and a regional report published every month in print and on iPad - the next feature covers the North-East and will be published next week.