Roundup: Brexit causes decline in homes for overseas firms plus co-living growth

29 January 2021 | Investment

Downward pressure on demand driven by political concerns and travel restrictions

The decline in overseas property ownership since the referendum appears to have been partly driven by uncertainty caused by Brexit, Search Acumen found. The result, which saw Leave win by a narrow margin, prompted investors to see properties in England and Wales as less attractive investment opportunities.

This is most apparent with ownership of properties in prime locations, with London and the South East falling the furthest.

Equally, the strict restrictions imposed on international travel to curb the spread of Covid-19 is likely to have further diminished the attraction of owning property in England and Wales, especially in previously popular areas such as London.

What’s more, Search Acumen suggests overseas landlords and investors may have disposed of elements of their property portfolios to offset sharp falls in the value of their wealth reserves triggered by the pandemic.

Typically, overseas landlords and investors are wealthier individuals who own equity portfolios, meaning severe stock market volatility at the onset of the pandemic could have prompted them to sell overseas properties to recuperate losses.

Uptick in investment in the North

Companies now own fewer properties in Greater London, Essex, Kent, Surrey and the West Midlands than they did in June 2016, comparison of trends among the top ten counties for overseas investment revealed.

By contrast, they have increased their presence in Greater Manchester, Merseyside, West and South Yorkshire. Overall, properties in the north of England have witnessed an uptick in investor inflows since June 2016.

Additionally, the research found there has been a post-referendum rise in the number of properties registered to companies in Jersey, Guernsey, Luxembourg, Singapore and the Netherlands, while the number of properties registered to companies in the British Virgin Islands, Isle of Man, Gibraltar, Hong Kong and Ireland have all declined.

Andy Sommerville, director at Search Acumen, said of the findings: “This research reveals the scale of the impact that Brexit-induced uncertainty has had on international demand for properties in England and Wales.”

“Heightened unease over the nature of the post-Brexit transition relationship may have prompted investors to look beyond England and Wales for returns.”

He added: “The coronavirus pandemic and measures to contain its spread have also put downward pressure on international demand. Overseas investors are questioning the benefits of owning residential properties in London if they cannot even stay in them.”

That said, the promise of an effective vaccine being distributed is fuelling hopes of economic activity reverting to normal soon, which Sommerville believes will likely increase the attractiveness of English and Welsh-based properties to overseas companies.

“As activity picks up, it is crucial legal professionals are given the tools to harness accurate data at the early stage of the transaction process when dealing with complex and potentially sensitive transactions,” he continued.

“The pandemic has revealed that incorporating technology in the transaction process vastly improves it. The English and Welsh property market has the opportunity to embark on a dramatic overhaul to unlock further efficiency gains.”

You can see two tables outlining the post-Brexit trends below.

TABLE 1: Trends among the top ten counties for overseas investment

County

Number of properties owned by overseas companies in 2020

Number of properties owned by overseas companies in 2016

% change

GREATER LONDON

42,193

44,378

-5%

GREATER MANCHESTER

5,396

4,929

9%

MERSEYSIDE

2,904

2,624

11%

WEST YORKSHIRE

2,621

2,525

4%

WEST MIDLANDS

2,144

2,297

-7%

SURREY

1,893

2,200

-14%

KENT

1,811

1,992

-9%

ESSEX

1,748

1,835

-5%

SOUTH YORKSHIRE

1,648

1,495

10%

LANCASHIRE

1,569

1,566

0%

TABLE 2: Top 10 investor domiciled areas with the greatest volume of properties owned in England and Wales in 2020 

Country

Number of properties owned by overseas companies in 2020

Number of properties owned by overseas companies in 2016

% change

BRITISH VIRGIN ISLANDS

22,066

22,868

-4%

JERSEY

20,916

20,494

2%

GUERNSEY

12,314

12,167

1%

ISLE OF MAN

10,551

10,843

-3%

LUXEMBOURG

2,667

2,291

16%

GIBRALTAR

2,398

2,592

-7%

SINGAPORE

2,089

1,890

11%

HONG KONG

1,604

2,092

-23%

IRELAND

1,591

1,863

-15%

NETHERLANDS

1,547

1,448

7%

PANAMA

1,414

1,991

-29%

SEYCHELLES

1,338

1,297

3%

CAYMAN ISLANDS

1,333

1,350

-1%

CYPRUS

1,231

1,244

-1%

Co-living company sees rapid growth despite pandemic

Last week, Gravity Co, a co-living company focused around ‘community, flexibility and personal growth’, announced it had raised $1.4 million (approximately £1.026 million).

This comes, it says, amid a period of high growth spurred by lockdown loneliness during Covid-19, in an ‘increasingly disconnected world’.

With the additional funding, Gravity plans to expand its borderless community internationally, increasing the diverse range of flexible homes available to its members. 

The firm is currently working on a range of projects with strategic real estate partners in London, Paris and Barcelona, as it aims to develop a network of co-living spaces in major business hubs, globally.

It already has a pipeline of expansion that is set to see beds in London double again over the next two months. What’s more, Gravity plans to use the funds to increase its team further after already doubling its headcount during the pandemic.

The increased headcount has come as a direct result of increased demand for the co-living model across London, it says, with Gravity opening two new buildings during lockdown in a period of decline for a number of other accommodation operators. 

Riccardo Tessaro, co-founder and chief executive of Gravity, said: “We’re currently in a new era of co-living. People are done with the ‘hustle harder’ culture, and the pandemic has meant that people have realised there’s more to life than just work. We are currently witnessing increased interest in co-living from the public. I think we can expect to see a co-living boom and a wave of renters moving towards a product that adds value to their lives. We’re seeing the needs of the entire workforce changing and the renting market needs to reflect this.” 

Gravity is announcing a series of strategic tech and start-up partnerships with the mission of making London a more accessible place for entrepreneurs and talent to live, innovate and grow in a healthy environment.

One of these partnerships is with well-renowned coding bootcamp Le Wagon, where people go to learn to code, with 60% of students having to relocate to London to attend its intensive course. Gravity’s membership base is already 50% technology followed by finance and creative industries, which it says creates a collaborative ecosystem with diverse skill sets and talents.  

Katherine Willis, global traffic manager at Le Wagon, said of the partnership: “At Le Wagon, we have a hugely diverse community of applicants, students and alumni, so offering accommodation options is something we’re proud of! We like Gravity because it’s not just somewhere to sleep, it’s also a thriving community focused on wellness and professional development. Those not from London can feel at home and even more connected to their bootcamp peers.”

Co-living, at present, is still a very niche part of the market – and way below Build to Rent and purpose-built student accommodation in terms of units built or under construction. But there are signs that this could be starting to change, with some arguing that co-living is about to have its moment in the sun, propelled forward by the increasing desire for community during the pandemic.

<!– LinkedIn –> This post has originally been featured in Property Investor Today.