The unlocking of the English housing market led to an immediate uptick in online browsing and demand for sales as well as rentals.
One week after the reopening of the market, Rightmove reported demand for rental property being up 33% compared to this time last year, with Monday May 18th reporting the highest level of rental demand ever recorded in one day on Rightmove.
One of the defining elements of any evolving economic shock is the lag of reliable data – this is even more the case with the current combination of Covid-19 and a shock to oil prices. Both led to something far different from a “normal” recession, and a reliable picture of what the world looks like now will emerge only slowly over the coming weeks and months. Despite that, we are trying to work with what we have to give you the most appropriate snapshot on the UK residential property market at this point in time, and the performance of the TM home investor fund.
Lockdown measures continue to impact the number of housing transactions in the UK and dealing in the Fund remains temporarily suspended, effective 10:30pm on 17th March, whilst its Standing Independent Valuer, CBRE, expresses material valuation uncertainty. CBRE continues valuing the 203 properties in the fund in line with proper market practices, adopting a comparable method of valuation – although given the low transaction volumes there is a dearth of evidence on which to rely, and there currently seems to be more reliance on agent sentiment and asking prices than one would expect within a ‘normal’ market. However, we have been advised by our valuers and letting agent that enquiries to local agents increased markedly in the last week of April, which we assume is people envisaging an imminent end to Lockdown, and implies that the underlying sentiment I talked about in February remains.
We continue to have ongoing conversations with the Fund’s Standing Independent Valuer, CBRE, regarding property valuations, and have published an update which can be downloaded below.
Over the past few days all regulated property valuers informed fund managers that a “Material Valuation Uncertainty” clause would be included in their next valuations. The disclosure of their intent to include this clause subsequently results in Depositaries and ACDs suspending dealing in property funds. Unfortunately, we are no exception to this rule.
This is the first time since inception in 2012 that the TM home investor fund has suspended, and is not linked to the fund’s performance, nor to its liquidity which stands at just over 15%.
Over recent weeks, we have seen the Coronavirus coming to dominate the political and economic agenda, and wreaking havoc on financial markets. What has been the impact on UK housing and what is our outlook?
From December to the end of February, we have seen a remarkable change in sentiment in the UK residential property market. Four of the five property indices monitored by our benchmark index, LSL Acadata, reported average house prices reached new record highs. According to the latest RICS UK Residential Market Survey, buyer enquiries, agreed sales and new instructions all rose over the month extending a run since December 2019. Near term sales expectations remained positive for the 5th month running.
We have seen a remarkable change in sentiment in the UK residential property market.
According to the latest RICS UK Residential Market Survey, buyer enquiries, agreed sales and new instructions all rose over the month and all respondents remain upbeat on the outlook for sales in the coming year. In that more positive context, the TM home investor fund recorded its second month of upward valuations in the property portfolio. In December, our holdings in Manchester were valued upwards and in January our independent valuer increased valuations on all our units in Wembley. In total we hold 39 units across these two sites totalling 20% of the overall property portfolio.
Furthermore, following positive inflows of new investment into the fund, it will shortly complete on a purchase of 13 three-bedroom new-build houses in Smethwick, West Midlands for c. £2.9 million. Completion is scheduled for the end of February on 11 of these, with the remainder in April or early May. This development is a good fit in terms of our investment strategy – we favour the Midlands as a region, and the development is near a new Super Hospital and a 6-minute train journey to Birmingham New Street Station. We aim to make a further acquisition of up to £2 million in the coming months, and these acquisitions will bring the cash levels back into our target range of 10-15%.
This presentation describes the TM home investor fund, with the objective of allowing retail clients to gain an overview of the product’s recent history. It should not be considered advice or an invitation to invest.
As with all investing, your capital is at risk. The value of your portfolio with TM home investor fund can go down as well as up and you may get back less than you invest. LEARN MORE ABOUT RISK.
Hearthstone Investments Ltd is the parent company of the Hearthstone Investments Group. Regulated business is carried out by Hearthstone Asset Management Limited. Hearthstone Asset Management Limited is an appointed representative of Thesis Asset Management Limited which is authorised and regulated by the Financial Conduct Authority (114354). Hearthstone Investments Ltd (06379066) and Hearthstone Asset Management Limited (07458920) are both registered in England and Wales. The registered office for both companies is c/o Waterstone Company Secretaries Ltd Third Floor, 5 St. Bride Street, London, United Kingdom, EC4A 4AS. Thesis Unit Trust Management Limited is the Authorised Corporate Director of the TM home investor fund. Authorised and regulated by the Financial Conduct Authority (186882).