News that UK property firm Quintain Estates and Development has agreed a £700 million takeover by US private equity firm Loan Star has put the UK property market very much back in focus. This is one of many ongoing US transactions in the UK as investors continue to take advantage of the strong dollar which is giving US investors renewed strength when looking overseas.
This particular transaction seems to revolve around a large landbank in the area of Wembley Stadium owned by Quintain Estates and Development which the company has been trying to develop for some time. It seems that US investors are very keen to take control of prominent land banks in some of the more wealthy areas of the UK.
Are investors now getting a little over exuberant?
While there is no doubt that US investors are in a much stronger position than many of their overseas counterparts there is some concern that investors are now starting to get a little over exuberant. Despite the fact that the European economy is struggling, the US is not performing as well as it had been expected it seems that historically low interest rates (leading to cheap funding) and currency movements could be behind recent buying interest.
It will be interesting to see how far valuations become stretched in the short to medium term because there has been significant interest in UK property companies over the last couple of years.
Government policies move markets
One interesting fact which emerged from the take-up of Quintain Estates and Development concerns the opinion of many analysts that the UK government could become more involved in housing plans. The government is seeking to step in where local authorities are perhaps a little slow to confirm local housing plans and many believe this could play into the hands of developers such as Quintain Estates and Development – with a significant landbank around Wembley Stadium.
The fact is that all political parties have in essence committed themselves to significantly increasing new house build numbers across the UK. This will take some time to put into practice but eventually it will reduce the upward pressure on prices and should hopefully see a reduction in the gap between affordable housing and actual property prices.
Could this be the peak of the market?
Historically many investors and analysts would look at this recent obsession with UK property and perhaps suggest investors were a little over exuberant and we could be approaching the peak of the market. This may well turn out to be the case but at this moment in time, as we touched on above, US investors are in a very strong position due to the strength of the US currency and, with worldwide base rate still at historic low levels, there is still plenty of cheap funding available.
It will be interesting to see how the markets react in the short to medium term, whether overseas investors maintain their current appetite for the UK market or whether potential shocks in Europe could derail real estate investors in the short term. There is never a dull moment in the worldwide real estate market!