The UK property market has continued to demonstrate resilience and stability in the past six months, with residential prices increasing by 2%-3% over a 12 month period. Overall transaction levels remain in line with recent years at a national level. However, markets have continued to diverge regionally since the EU referendum with prices now weakening in some areas of London and transaction levels dropping materially.
For the past two years, we have focused our investments on higher yielding areas outside of London but the overall performance of our portfolio reflects a regional balance which includes a 28% weighting to the capital.
Latest revaluations imply a total return of 7.3% p.a. across the platform since launch
Every six months, an independent, RICS accredited surveyor re-values every property on the Property Partner platform. Of the 95 properties that were revalued at 30 September 2018, 21 saw an increase compared to their March level, 57 remained unchanged and 17 experienced declines. The result was an aggregate increase of 0.02% in the underlying value of properties in the portfolio over the past six months.
You can view comparables for each of our residential properties here.
Since purchase, properties in the portfolio have increased in value by 5.3%, with a weighted average time on spent on platform of 22 months.
The revaluations have produced an average total return of 7.3% p.a. across all properties since platform launch, as shown below. This is made up of 3.2% from capital growth and 4.0% from dividend yield, denoted by the blue bars in the chart below.
Total return* is expressed as an annual percentage and comprises capital growth, i.e. the annual growth in the value of investments as a percentage of the initial capital invested, and the annual dividend yield, which is paid monthly to investors. Revaluations of individual properties are reflected in the properties section of our website and details of the above total return calculation can be found here (not available on mobile).
Taking into account the full discounts achieved at purchase, the total return increases to 11.3%
The green bars in the chart above denote the annualised total return since platform launch, if latest share values are rebased according to each property’s current valuation at the intended method of sale. This reflects the impact of realising all discounts achieved by purchasing properties at investment value, which we intend to break up and sell as individual units at vacant possession value. There are 45 such assets on the platform, explaining the increase in capital performance if all discounts achieved at purchase were to be realised.
The total return over the past 12 months is 5.1%
The blue bars below show that the portfolio has, on average, after all fees, delivered an annual total return of 5.1% over the 12 months to 30 September 2018, including a dividend yield of 3.9% and 1.2% in capital value growth.
Regional properties had a total return of 8.4% p.a. since launch, outperforming London at 5.3% p.a.
The chart below displays the performance of London properties against those situated outside of the capital, on an annualised basis from the launch of the first property in each area, corresponding to the annualised total return of 7.3% across the portfolio.
The rest of the UK has performed strongest with annualised total return of 8.4%, consisting of 3.7% capital growth and 4.7% income return. In contrast, London has seen a lower total return, at 5.3%, with capital growth of 2.5% and an income return of 2.8%, reflecting wider market conditions as house price growth has slowed in the capital and parts of the South East of the country, particularly relative to the midlands and North West.
Since the EU referendum in June 2016, Property Partner has focused our acquisition strategy on higher yielding properties in the UK regions, with 43 out of 46 new residential listings located outside of London during this period. Prior to this point we focused on London to take advantage of strong market conditions at the time. At 30 September 2018, the 44 London properties on our platform have a total value of £31.1m, representing 28.2% of the value all properties contributing to this performance analysis.
The graph below denotes the regional return profile based on 12 month performance at the end of each period, corresponding with the total return of 5.1% across the platform at 30 September 2018. UK regions outperformed the capital in the 12 months to 30 September 2018, with an income return of 4.6% compared to 2.8%, capital growth of 2.7% versus -1.5% and a total return of 7.3% against 1.3%.
Average dividend yield of new listing properties funded in the 12 months to 30 September 2018 is 5.5%
High-yielding PBSA blocks have driven a higher average dividend yield across new properties listed on the platform. Over the last 12 months, the new properties funded on the platform have had an average dividend yield of 5.5%, compared to 4.1% across all properties since platform launch.
In addition to higher yields, we remain committed to offering regular, high quality, hand-picked property investment opportunities, with sufficient diversity by location and type, to enable investors to quickly build a diversified portfolio.
Assets under management increased by £8.8m in the six months to 30 September, reaching £124m
The total value of properties on the platform is £124 million, an increase of 44% in the last 12 months. Properties that completed funding during the last 6 months included a purpose-built student accommodation property (PBSA) in Worcester, a 19th century former fort on the Isle of Wight converted into luxury houses and a portfolio of supported living properties let to a housing association with long dated, inflation-linked income.
The portfolio now includes 107 separate assets for investors to select from, which contain 878 individual units, flats and houses.
First property development loan funded, paying interest of 12.5%
In addition to sourcing properties with higher income yields, we have begun to list property backed debt investments on our platform, providing investors with the opportunity for further choice and diversification across higher yielding investments. In September we funded a £1.2m bond backed by a loan with second charge security against a residential development project in Basildon Essex, paying 12.5% interest over a 15-month term. We intend to expand this part of the business in addition to our core property investment offerings, with additional property-backed debt investments scheduled for launch on platform in the coming months.
We are passionate about transparency and hope this information is helpful as you consider your investment decisions. You may also like to read our Open House series where we share further information about our community, investment performance and measures of activity on our Resale market each quarter. The September update is coming soon.
If you have any questions or comments on this article, or anything else, please call us on +44 (0)20 3696 5600 or drop us an email on firstname.lastname@example.org – we’d love to hear from you.
* Since the launch of the platform in January 2015, properties have, after fees and corporate taxation, delivered an estimated total return of 7.3% p.a. up to 30 September 2018; including 4.0% net rental income (dividends) and 3.2% capital value growth. These returns are calculated six monthly and (i) with reference to the average dividend yields and price movements of properties with at least 3 months trading history on the Resale Market, (ii) spreading over 5 years any purchase discount to the RICS valuation, (iii) amortising property acquisition costs over 10 years, (iv) assuming the property remains tenanted, (v) assuming that investments are held for the long term, to the extent that the annualised impact of the Property Partner initial transaction fee becomes immaterial, and (vi) weighting each property’s performance according to their initial funding value. You can download the objective data used to calculate this estimated return here (not available on mobile). Past performance is not a reliable indicator of future performance.