Since 1960 residential property in London and its surrounds has proved to be a fundamentally sound investment for property owners. There are a number of reasons for this which include the following:
- London and its environs are the economic driving force of the U.K. As a result of this economic growth wealth has increased and the population of London and its surrounding areas has increased. This has resulted in ever increasing demand for residential property through the number of people in the market coupled with the effects of more prosperous people demanding better and larger homes.
- On the supply side land for building new property is in short supply, a factor compounded by planning laws and regulations and by the natural resistance of existing populations to new and over development.
- During the past fifty years sterling has been subject to inflation to a greater or lesser extent. Indeed, the Bank of England’s remit is to ensure the pound inflates gently since that is believed to assist economic growth. As a result, residential property prices should rise naturally year by year before the effects of growing demand and lack of supply come into effect. This results in rising property values in the medium to long term.
- Residential property as an asset class naturally lends itself to moderate gearing. Sensible gearing enables the investor safely to enhance returns in a relatively low risk manner so increasing returns on capital employed.
The purpose of First Residential Properties Plc is to take advantage of the characteristics of residential property as an asset class and to generate superior returns for investors by:
- Skilled buying in good, but not prime central, locations
- Building a balanced portfolio of houses and unbroken blocks of flats to ensure the maximum rental yield available whilst concentrating on securing good growth in asset values
- Holding property as a medium to long term investment to maximise returns for shareholders. This ensures there are no costs and expenses from “churn”, which costs, being substantial, and do little but reduce shareholder value. The increase in shareholder value will derive both from efficient management maximising net retained rentals as well as the propensity of residential property values to rise.
- Good, diligent management of the property portfolio to maximise rental returns and minimise costs in the operation of the property business
- Minimising costs all the way through the business so that rents generate cash for the benefit of shareholders and are not wasted on fees for advisers and over generous remuneration for management
- Aligning the interests of the manager, Walbrook Property Management, with the shareholders so that the manager’s returns are dependent upon the returns made by shareholders.
- Gearing the company modestly and safely to enhance returns for shareholders;
- Ensuring that the group is structured in a tax efficient way to minimise cost from this source.
- Ensuring that realisation is carried out skillfully with good market timing to maximise returns for shareholders at exit.