Global Opportunities - Knight Frank Report

Global Opportunities report by Knight Frank - Residential Research

This is a short report that was published recently by Knight Frank, available for download free on their website.

Mainstream Markets - Overvalued or undervalued?
This graph caught my attention.  Knight Frank uses data (Price to rent ratio / Price to Income Ratio) and puts the mainstream OECD markets on a chart seen below.

Overvalued
Property markets on the left of the chart are over-valued, based on Knight Frank's definition.  The most over-valued market is Norway, followed by Canada, Belgium and then New Zealand.  The prices in those market are still rising.

Undervalued 
On the other extreme, Japan is the most undervalued, followed by Greece and Germany.  This is a very interesting observation.  Currently, quite a number of Singaporeans have started buying into Japan.

Property Market Cycles
This is another useful pie chart.  If you believe that property is in cycles, then this pie chart is worth a second look. Netherlands, France and Italy are bottoming.  However, if you look at the earlier chart, Knight Frank said that Netherlands and France were over-valued markets.

So, what do we make of this?  Do we buy into an over-valued market that is bottoming out?  Interesting to ponder.  Perhaps we should buy into Germany.  It is a rising market yet undervalued.  Any good deals there?

The second part of the short report looks at second home acquisition.  Given that Knight Frank's business is to sell properties, we should take this with a pinch of salt.   They claim that more people are now interested in buying a second home.  What is this second home that Knight Frank is talking about?

European Second Home
Look at the typical locations for a 2nd home in Europe.  Very interesting.  Evian!  Fancy a home there? It is a high-market holiday resort and spa town, on the shores of Lake Geneva.  The G8 Summit was also held there before.

Royal Hotel, Evian, Host of 2003 G8 Summit

Dining Room, Hotel Royal, Evian

What about Gascony, France?  Prices dropped 45% and are now rising.  The chart below shows destinations for second home in Europe.  Well, I am not expert in this market, so read it for what it's worth. Some of the prices have dropped a lot since 2008.

Caribbean Second Home
Another market for second homes would be in the Caribbean.  Again, I have no clue what these markets are, just read for what it is worth.

Imagine owning a holiday home in St James, Barbados.  Oh well, we can keep dreaming.

Would a holiday home in Barbados be a good investment?

Do leave a comment at the community forum here. 

Happy Investing!

Prime Central London Prices Up Rentals Down - Knight Frank

Prices in Prime Central London (PCL) have risen 68% in past 5 years.  But rentals have not kept up, in fact they have declined in the past 2 years, though it may be bottoming out.

Prices Go Up, Rentals Come Down
What do you make of this? Yields are definitely dropping to the floor. The again, do yields matter?
Yes, to a normal retail investor looking for consistent positive cash flow, especially when you need to service a mortgage.

No, if you are so rich you are just looking to park your money in a safe haven.

However, buying in PCL doesn't work for us because we are looking for rental yields and not just parking money in a safe haven.  Read more in this blog post.

Properties in Prime Central London - A Different Asset Class
We think that properties in Prime Central London are an asset class on its own. Look at it this way. There are an estimated more than 100,000 ultra high net worth individuals in the world, defined as investible assets of more than US$30 mil. The number goes up exponentially if you drop this figure down to US$20mil or even US$10mil. All these people can easily afford some type of property in PCL.

If they are looking to diversify and park their money in a safe haven, them London PCL would be one of their main choices.

Not to mention, the rich and famous also like to have Central London House.  Apparently Beyonce & Jay Z bought a £5 Mil House in Mayfair this April.

The following are screenshots of Knight Frank's reports.

1) Prime Central London Sales Index

Look at the price index for the past 2 years.  Consistent upward trend.

2) Prime Central London Rental Index

Look at the last column - monthly change.  Almost all negative.  The 3 month change %, all negative.  Note that these is a price index, i.e. against absolute prices. Nothing to do with rental yields.

Happy Investing!

Royal Mint Gardens by IJM Land

Royal Mint Gardens by IJM Land

A luxury development by IJM Land and marketed by Knight Frank.

It turns out that IJM Land is one of Malaysian's largest property developer, listed on the Malaysian Stock Exchange.  We were very interested by this development as it appeared that this was IJM Land's first foray into London.

(image taken from the royalmint website)

Location
The location is very promising. It is very close to the City of London.  For my recent site visit, I got off at Tower Hill Tube Station and took a walk towards Royal Mint Street.  It was about 3 minutes walk (ok I walk quite fast, but most Londoners do!)

On Google Maps, this development it is on Royal Mint Street (which is a very short street), and right next to Tower Hill Docklands Light Rail (DLR) station.

A short video I took of the location back in Oct 2013. It was a rainy day. You can see the plot of land and how close it is to the DLR station.



High Price?
Well, you can't fault developers for trying to make good profits.  In terms of price, we felt that this development was priced rather aggressively (800 to 1,000 psf).  However, now that I have physically been on site, I don't think that the pricing is unreasonable.  In terms of potential capital appreciation and rental potential, this development is very strong in this respect.  Why didn't we buy?  Well, the price tag was a tad too hefty for us.  You can read more about our investment strategies in this post.

You may think that the immediate area looks rather run-down.  To tell the truth, it is.  The issue is whether the area has the potential and whether there are more investments coming in here.  The answer to both question is yes and yes! There are many exciting developments coming up in this vicinity.  Why?  Location-wise, it can't be beaten.  It is right at the door-step of the City of London.

The Royal Mint Development would definitely help transform this entire area.  I certainly look forward to Royal Mint completing in 2017!

By the way, this development is also very near the Broadgate Complex that GIC has invested in.

Back to our welcome (& content) page....