Jonathan Waxman, a professor of oncology at Imperial College, London, wants to help his children get onto the housing ladder.
Both are currently in their early 20s but with house prices in the South East soaring over the past decade, Waxman says it is becoming increasingly difficult for this generation to get on to the property ladder, even if they secure decent jobs and careers.
“I decided I wanted to try to help my own children, at least with the deposit.” As he did not have sufficient savings at the time, he started to invest for his children around five years ago.
But rather than put his savings into an equity fund, Waxman has chosen to invest in a property fund, where the money is directly invested into the London market.
“I wanted an investment where my money would keep pace with house price inflation. I’m getting less than 0.5% on my money in a savings account and my experience of stock market-based investments has been that they are fairly useless.”
However he says he’s been delighted with the “phenomenal returns” on London Central Residential Recovery Fund (LCRRF).
“I’ve made around 13% a year, so am obviously very pleased with this.”
This compares to an annualised increase of 3% in the FTSE 100 since 2010, when the fund launched.
This is the second fund launched by London Central Portfolio (LCP) and is a closed-end fund, listed in the Channel Islands, which invests in smaller flats in the prime market in central London. It has subsequently closed to new investors.
Investors, like Waxman have to be prepared to lock their money away for the full five years. Early access to funds is not allowed; however, as investors are issued with shares in is possible to sell these – although LCP company points out that it has only done this three times, when investors have died or divorced.
London Property: A Finite Supply
Waxman says: “I know there has been more negative publicity about the housing market it recent months, and it may well be that there is a dip in prices. However, it seems to me that this is a solid long term investment.
“Prime London property will always be attractive to those with the money to buy it. It’s like precious metals or gemstones: it is a limited resource.”
However as he points out only the exceptionally wealthy can afford to buy flats or houses in prime locations in the capital. Investing through a fund structure opens up this market to more modest investors like himself.
“I don’t have the capital to get into the buy-to-let market directly, and I am not sure whether I’d want the hassle - whether it’s boilers breaking down, or additional stamp duty charges landlords now face.”
In recent years the Government has tried to put a brake on house-prices by making buy-to-let a less attractive option for private landlords. From the start of this financial year there is now a 3% surcharge on stamp duty for second homes, and landlords can no longer offset all the mortgage interest against their tax bill.
However, these changes don’t impact larger institutional buyers in the property market. Waxman concedes that these changes could have a negative effect on property prices, but he remains convinced in the long-term attractiveness of property as an asset class, particularly in the London area.
“I hope this investment will mature with sufficient returns so my children can put a deposit down for a house by their mid-20s,” Waxman said.
Retirement Planning
As well as investing modest amount for his children he is also investing some of his own money in these funds, via a SIPP, but his main retirement savings are with his university pension.
“I’m in a fortunate position in that I’m able to put aside something for my children. But I want to be make sure that I get the best return I can on what I can save, so hopefully this will make a real difference.”
