When investment buyers consider a development, their priorities are different to those of people seeking a home, says George Cardale, Head of Residential Development Sales for Savills.
Investment buyers at new developments are not seeking a home for themselves, but rather a home for investments – either for their own money, or for the funds of major financial institutions.
Buy To Let Investors are typically aged between 30 and 50 and are attracted by the gearing which means that instead of having money in the bank earning about 1.5 or 2 per cent interest per annum, they can take out a Buy To Let mortgage for a property to rent, obtaining an approximate annual 5 per cent yield and a 5 per cent capital growth in many areas of the UK.
Corporate investors
Corporate investors in the Private Rental Sector (PRS) are often financial institutions typically looking to purchase properties in bulk – usually off-plan and at a small discount – and often hold them for 25 years to rent before selling. The attraction for these investors is also the combination of yield and capital growth.
There are a numerous similarities between the requirements of individual Buy To Let investors and large organisations, and these needs should be borne in mind by any developer.
The most fundamental requirement of investors is that they want to buy properties which will rent well– so it is essential that the design and specification of the building is carefully planned.
Wide market appeal
Among developments currently being sold by Savills that are have proven popular with investment buyers are Hoola, at the Royal Docks in east London, and Finzels Reach in Bristol. Both of these have wide market appeal.
The other day, we had to advise a developer that it would be advantageous to modify the cutting-edge, industrial style interior proposed for a scheme.
This was in order to make the development more attractive to investors, who are often driven by sustainable finishes. The interior design initially proposed could have graced the pages of a glossy magazine, but the problem was that it might have deterred some buyers.
A pragmatic approach
Investors appreciate the need to take a pragmatic approach to the durability of fixtures and fittings. They are attracted to new build by low maintenance costs, and do not want to incur unnecessary expenditure by having to replace something such as flooring after a short period of time.
With that in mind, it is worth remembering that wood-effect flooring can wear poorly, and that carpeting has a shelf-life.
I believe it is best to avoid interiors that are overly personal in taste, as there is a risk that one person might love a look that is loathed by two other people.
Investors will also consider the management fees and running costs of a building, and if buying in bulk will want the option of controlling the management themselves, in order to increase efficiencies.
Savills Residential Development Sales represents new-build developers around the country. To discuss being represented by the Savills sales team, email gcardale@savills.com To see the current selection of newly-built properties available through Savills, go to www.savills.co.uk
