Or to put it another way: Is there an equation behind successful stock picking for the residential sector?
We at Mill Group have been stirring up our little grey cells to see if we can cut through the cacophony emanating from the wall of sound that is our technologically enlightened age, to sort the “wheat from the chavs”. That is to say: Can we locate robust and verifiable information, untainted by agent speak and predict the areas where in the future the desirable properties will reside?
- So to enable a real time ‘start now’ feeling, we have had a colleague padding the streets, (with a not inconsiderable amount of perspiration), to acquire directly from agents actual details on properties that are currently for sale or to rent as opposed to those that get retained for advertising purposes in shop windows or on the web. This has given us a £ per square foot acquisition rate and real yields for each type of property in each postcode location.
- We then want some stability in our growth, so look historically to the time before the economic meltdown and check the movement in house prices before looking to our crystal balls and adding in some borough level house price forecasts from a reputable independent source with no axe to grind.
- The next part of the equation involves a score for current transport infrastructure, plus another for future transport upgrades. Look at what happened with the areas around the Jubilee Line extension including Stratford, and then think about Crossrail 1 and the Northern Line Extension and look forward to HS2, Crossrail 2, the proposed DLR Extensions and others.
- Now comes the tricky part, as it’s subjective – take a view about the growth potential of the areas. The was a time when most property people would have traditionally trotted out “West is Best and East is Least”, but that was before elements like Canary Wharf and the Olympics came along and turned that one on its head. But you can rank areas with some confidence by looking at their potential by comparison to their peer groups.
- Finally add in some demographic analysis from other independent sources to see what sort of place nice people like to live in and who exactly those nice people are.
Put these component parts together, add weighting to each element and spread as liberally as a UKIP councillor to mitigate concentration risk.
Et voila you have your equation which is just marginally more palatable and certainly more convincing to most potential investors than letting a svelte 2D Phil and a 3D Kirstie guide you. But admittedly not to all!