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Your capital is at risk and investments are not covered by the Financial Services Compensation Scheme (FSCS).


Why Invest in Low-Cost Housing?

Uncertainty 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.  


Government action

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. Firstly, 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 property market.

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:
1.  Provide investors with stable, high-yielding and tax-free* returns targeting 6.85% per annum for 5 years;
2.  Help address the UK housing shortage and get first time buyers onto the housing ladder.

*“Subject to individual status and legislative change”

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Capital at risk and returns not guaranteed, and investors should read the full risk warning on the Crowdfunds site before deciding to invest.