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Why Invest in Low-Cost Housing?
over Brexit is spilling over into several markets as many investors adopt a
‘wait and see’ approach. For
those that are looking to competitive new markets, the low-cost housing
market is of increasing interest.
Bricks and mortar has always been considered a safe investment
Property has always been seen as a reliable investment over
the long term due to the simple fact that people are always going to need
somewhere to live. Historically, few investment classes perform better in the UK.
Brexit has clearly caused the wider, premium property market in the UK to slow,
however the supply of low-cost
residential property continues to be outstripped by demand, and is likely to continue to be so whatever the
outcome of Brexit.
According to statistics
from the ONS (Office for National Statistics), in 2017 the average full-time
worker could expect to pay 7.8 times their annual earnings to purchase a home
in England or Wales. That was an increase of 2.4% on the previous year and that
scenario has been worsening ever since.
The Government realises this and has calculated that an additional 240,000 new
homes need to be created every year to keep up with demand, a figure that most
estate agents believe is actually quite conservative. As a result, demand is
getting higher year-on-year. A recent piece of research commissioned by Ocea found
that, of 2000 non-homeowners surveyed in the UK, over two-thirds (68%) were
concerned that they will never be able to afford their own home due to high
deposit costs and rising house prices.
Despite the statistics, new home builds have already reached
an all-time high. The problem is, however, that 58%
of market demand is for homes costing less than £450psf and only 15% of
developments are within this price range,
hence the need for more homes at the lower end of the property market to be
created at a faster rate.
The question is: how can this be achieved? The Government
has recognised the problem the UK property market is currently facing and has
changed the planning laws in order to give the supply of homes the boost it so
badly needs. Having made a pledge to deliver half a million new build homes by
the end of 2022, two key pieces of legislation have come into effect.
is the Government’s Help To Buy scheme. The scheme enables first time
buyers to purchase a newly built home with a 5% cash deposit. The Government
then lends 20% of the purchase price by way of an equity loan and the remainder
is funded by a 75% mortgage. This scheme not only lowers the high deposit costs
that first time buyers are currently faced with, but it also ensures their
monthly mortgage payments are manageable.
The second piece of legislation is Prior Approval Permitted Development which is
designed to drive the supply of housing by making commercial-to-residential
conversions simpler and quicker. Prior Approval means these types of
conversions no longer need to go through the full planning process, as long as
four tests are met (noise, contamination, flooding and highways). Once this has
been achieved, the conversion of the building into residential use is
pre-approved and cannot be refused by a local authority.
The market is waiting
Analysts confirm that there is huge demand among
house-hunters for “affordable” properties. Colin Bradshaw of customer
intelligence and consumer research firm, TwentyCi, says:
“While many indicators
show that property prices are remaining stable and not falling, this is
undoubtedly a direct result of a lack of supply.” One of the largest real estate private equity investors,
Blackstone, has seen the potential and has already begun investing in the UK affordable
property sector. Others look sure to follow.
A look at underlying property market mechanisms tells us
that one side effect of increasing supply will be lower prices, which in turn,
will boost demand, particularly at the level of low-cost housing. In other
words, we are only at the beginning of this new investment trend in the
While market confidence is only beginning to form, we believe it will inevitably have picked up
before the next tranche of property developments is ready for the market, which
is when we can expect to see the trend emerge more strongly.As usual, those who get in first stand to benefit most.
This is where Ocea Bonds come in
Ocea Group is headed by Glenn Delve, a property expert with
a long and successful history of commercial-to-residential property conversion,
and Justine Curtis, an established property entrepreneur specialising in Prior
Approval Permitted Development Rights.
Ocea take unused and unloved office buildings and convert them into modern,
desirable and low-cost homes. To date, Ocea has developed or purchased over
£100 million worth of property, has delivered 679 apartments and achieved an
average profit of around 20% on completed projects. On top of this, Ocea has never had a Prior
Approval application refused.
Ocea Bonds has been established to provide Ocea with the funding and
flexibility it needs to identify more exciting opportunities to convert
commercial property units (especially vacant office buildings) into highly
desirable, low-cost residential property developments.
This will help Ocea achieve two main goals:
Provide investors with stable, high-yielding and
tax-free* returns targeting 6.85% per annum for 5
Help address the UK housing shortage and get
first time buyers onto the housing ladder. *“Subject to individual status
and legislative change”
Register to find out more about the opportunity, the market and Ocea Group Limited REGISTER TO LEARN MORE Capital at risk and
returns not guaranteed, and investors should read the full risk warning on the Crowdfunds
site before deciding to invest.