Prime Central London property is the first to recover after a property crash, and now is the time to invest, says Uma Rajah, chief executive of CapitalRise
PROPERTY is one of the most scrutinised investment classes in the UK. Everyone remembers the effects of the 2007 property recession, and borrowers and lenders alike are – understandably – wary of making losses.
But for income-driven, risk-averse investors, there is one type of property that has a history of defying expectations: Prime Central London (PCL) real estate.
“Prime real estate is the most resilient sector of the market,” says Uma Rajah, chief executive of online property finance marketplace CapitalRise.
“If you look at every downturn in the last 50 years, you see a very similar pattern, which is that prime falls less in a downturn, typically, and it always recovers significantly faster than other areas of the market.”
According to recent research by CapitalRise in conjunction with Savills Research, the PCL sector is set to increase by 20.3 per cent in compound growth by 2022. The Savills research also showed that the property market goes through a series of seven-year cycles of peaks and downturns, and in each case, PCL recovered the quickest.
For CapitalRise, the old adage ‘location, location, location’ rings true. The platform focuses on properties in prime London neighbourhoods such as Knightsbridge, as well as luxury homes in sought-after areas such as Winchester.
In fact, the platform has estimated that if you had invested £1,000 in PCL at the start of the 2007 cycle, by the end of that seven-year cycle you would have had £1,194 (+19.4 per cent).
By contrast, if you had invested that same £1,000 in general UK property in 2007, you would have ended 2014 with just £969 (-3.1 per cent).
CapitalRise offers its investors returns of between eight and 12 per cent by carefully choosing secured lending opportunities against luxury properties in prime locations. The typical CapitalRise loan is offered at around 65 per cent loan-to-value, a risk level “that most people feel very, very comfortable with for this calibre of real estate” says Rajah.
CapitalRise is thrilled with the demand that it has seen, such as its last investment opportunity which fully funded raising £1.4m in only two working days during their private members-only launch.
To further protect its customers, CapitalRise lends against a property value that has been provided by an independent, professional valuer which typically offers a conservative estimate on the anticipated sale value compared to the asking price of the property.
Rajah admits that there has been a softening in the market recently but she points out that savvy investors can use this to their advantage.
“There has been quite a significant softening already, so we see prices being down essentially 15 per cent to 20 per cent from their peak in 2014, and that’s been caused by Brexit uncertainty and stamp-duty changes,” she explains.
“So we actually feel that now is a great time to be investing in prime because our view is that we’re either at the bottom, or near the bottom of the cycle and this sector recovers very fast.”
In a way, this timing is ideal. CapitalRise has a number of new loans in the pipeline and Rajah says that she expects the business to “ramp up very fast” in the near future, as more and more investors realise the advantage of investing in PCL.
Click here to find out more about the investment opportunities offered by CapitalRise.