Another Acquisition in London! Greenwich Millenium Village!





Above is an apartment that I recently bought at the Canary Wharf on Manchester Road.

 

I recently made another acquisition in London. It is in the area of Greenwich and is very near the River Thames. It is around 0.8 miles from the Greenwich Tube Station or around 15 minutes' walk. Although it does not have river views, it is on the top floor and over looks a very nice garden with a pond or lake. This flat is off-plan, slightly different from my first acquisition which is a resale apartment at Manchester Road. My first acquisition was within 15 minutes' walk to Canary Wharf and the living room looks out to River Thames. I bought it for around GBP426 psf (factoring 50% of the balcony area). The Greenwich project costs around GBP420 psf (factoring 30% of balcony area) and to me, that's a good deal for a new project with little maintenance and hangups.

 

 

 

A map of Greenwich (the project is near the label A)

 

The older blocks that face the river

 

Aerial view

I wrote earlier that London's property prices are near the peak in an earlier blog post. But I realised that there are two tiers in London. Zone 1 has shot through the roof in prices. Gross yields in Zone 1 has fallen to 3%, 4% if you're lucky. The recent spate of property exhibitions in Zone 1 has attracted a lot of foolish money from Asians, sadly and specifically from Hong Kong, Malaysia and Singapore. Battersea project from SP Setia was sold at GBP1500 psf - 1700 psf. Most of the projects are above GBP1500 psf.

Let me ask you. How are you going to exit from this costly investment? Who are you going to rent it to? If the locals are buying older flats nearby at GBP1000, why would they buy from you at GBP1500? Who would rent it? Would the locals rent it from you at GBP5.67 psf per month, and pay GBP5,667 of rent per month, or would they pay GBP3,000 for the same size in an older apartment nearby? I suspect a lot of Singaporeans and Asians will get burnt.

Now look at the second tier properties. That's right, those in Zone 2 and 3. In Canary Wharf, prices are at GBP400 psf without river view and GBP500 - 600 with river views. I got them for GBP450 psf. My gross yield is close to 6%! This is 50% higher in yields! It's also near work place so I believe it's called the "Tampines and Jurong effect"! The outlying properties rise in Singapore because of secondary industrial / commercial centres being set up.

Don't go for the obvious! Go for the undervalued areas with potential. Greenwich is very near Canary Wharf. It's only one tube stop away from Canary Wharf in fact. There's O2, shopping malls and cinema nearby, which makes this a very livable area. I personally drove past that area and saw the potential. I know there are negatives about that area, namely the contaminated land from the gas furnace but it has since been decontaminated. Also, there is a high proportion of affordable housing which means we may have civil servants on lower paid salaries as neighbours. But the bulk of people living in Greenwich Peninsular work at the Canary Wharf. There's another commercial site in Woolwich which is one tube stop away and has a Cross Rail station. Woolwich will be another commercial centre that will rejuvenate the area.

My advice is always, go for value. The cheaper PSF that you buy, the easier for you to offload to locals or sell at a big profit. Also, downside risk is much less than if you buy at GBP1700 psf! Go for something with amenities nearby so that it's attractive to tenants and potential buyers. Don't buy stuff that look at other people's backyard because although price is cheap, rent is high, it may be difficult to sell! Take care of cashflow. Your rental yields must be reasonable and be able to cover your mortgage. I don't believe one bit about empty promises of future capital gains! If your gross yield is < 2% spread above borrowing cost (UK mortgage is 3.2%), forget it.

There is a huge shortage of housing in London. The population is growing at 100,000 per year, and there are around 2.5 people per household. London needs 40,000 new builts per year but guess what? It's managing only 20,000 - 30,000 new builts per year! The majority of the new builts are in Zone 1, which means you'll have lots of competition renting out your flat and lots of competition selling your flat. Singapore will not have a shortage of housing. Our aim is to increase population by around 1.7m people. Divide by 3 it means we need around 650k new homes. Government announced that it will build 700k new apartments. Get the drift? No shortage.... of houses.