Irish dominate UK residential investments market

Bulk buying at early stages is what differentiates the Irish players from the rest of the market, writes Sue Carter.

The residential investment market in the UK is dominated by Irish investors. Slick operators, savvy guys and shrewd investors is how Neil Batty, associate director of national residential investments for FPDSavills describes his Irish clients.

Nine years ago Mr Batty was a London agent making occasional trips to Dublin and Hong Kong to exhibit new developments for foreign investors. He now works, almost exclusively, for high net worth Dublin and Cork-based clients who are snapping up entire developments and other residential investment deals in the UK.

"I've gone from being a London agent to being a national one. A few years ago I didn't really know much about the market outside the south-east, but now my Irish clients want to buy in Glasgow, Bristol and the northern cities. That's where they get the best deals," he said.

He is reticent to name his main Irish clients. "I deal with a dozen serious players, some are individual big property speculators and others front large-scale syndicates. These are the main guys doing the multi-million pound deals. Then there's a second tier of about 20 or so investors that are also very active over here, more active than UK investors certainly," he said.

These investors acquire entire apartment developments, often in deals worth up to £30 million (€43.2 million). Bulk buying at early stages is what differentiates the Irish players from the rest of the market; they want in at the planning stage, and in some cases will begin to negotiate at the preliminary planning stage. They snap up apartment developments of up to 200 units before they even come out of the ground.

Bulk buying and early involvement has its advantages, as discounts can be negotiated. It's also a win-win situation for developers who can secure better terms for finance deals with guaranteed sales.

While Irish investors spend anywhere between £1 million (€1.439 million) and £30 million (€43.184 million), the average deal is usually between £5 million (€7.2 million) and £7 million (€10.08 million). Some of these investors are individual speculators who hold on to the properties, others front syndicates that sell onto pension funds and established client bases in Dublin, passing on the discounts they have negotiated.

A Dublin-based company called Capital Invest is one of Batty's major clients. He has just closed on a £21 million (€30.216 million) deal for Capital Invest in central Glasgow, buying two new apartment developments on High Street and St Vincent Street in the city, which are due for completion in 2006.

Medium-sized developments with smaller units in regional cities are what is in demand with Irish investors, according to Batty. Manchester, Birmingham, Glasgow, Bristol, Sheffield and the other northern cities are huge at the moment and that's where he's seeing most investments. Mr Batty says: "These are the main hotspots for the Irish. London was hot two years ago but it's been quiet for the last 18 months. People say it's coming back but I can't see my clients really going for it yet.

"They want blocks with smaller units in cities where they will see good capital growth. There's not much demand for properties with capital values in excess of £300,000 (€431,662), which is all you get in London really. They want cheaper units, and the northern cities is where they are."

The level of Irish investment in the UK is driven by the availability of high yields. Property yields in Ireland are weak. In Britain, investors can see returns of between 5-5.5 per cent, especially with lower euro interest rates.

Cities like Sheffield and Bristol present exciting opportunities for capital growth, unlike London and Dublin where the residential markets have peaked.

Based in the Mayfair offices of one of the UK's largest estate agents, Mr Batty has considerable experience in selling UK properties to foreign investors. Hong Kong was his main market until around 10 years ago, when the south-east Asian economies took a dive.

In addition to Irish clients, he also handles a number of buyers and syndicates from Israel and South Africa. But Dublin is where the majority of his business comes from and he travels frequently between Dublin and the UK.

He's very much in awe of his Irish clients. "These guys know more about the market here than I do, and certainly much more than similar syndicates or investors based here. They really do their research and can tell you which cities the government is planning on pumping money into, where infrastructural improvements are taking place and which are likely to see a lot of growth in values in the coming years. Their knowledge is very impressive."

A factor that endears these Irish players with developers and agents in the UK is what Mr Batty describes as the "discreet and slick" operational methods. When the syndicates purchase properties, they sell them on fast to their established clients.

Individual investors tend to hold onto smaller blocks and rent the properties. Agents never need to worry that these blocks will appear back on the market at lower prices just as the scheme is coming out. It's impossible to speculate how much Irish investors are pumping into the residential investment market in Britain; FPDSavills estimate it to be a £1 billion (€1.438 billion) market. The volume of deals taking place would certainly back this up and all the indicators suggest this is a market that is likely to see much growth in the coming years.