Fund management group Grosvenor, which specialises in property investment, has teamed up with Kleinwort Benson Private Bank to create the Grosvenor Kleinwort Benson residential property investment fund.
This offshore fund is aimed at high net worth clients who are looking for capital growth. It invests in properties in prestigious parts of Central London including Mayfair, Chelsea and Belgravia.
These areas were chosen because the supply of property is limited in those areas and because prices are high. A detached house in Chelsea currently costs an average of over £1m, compared to the national average of £171,021. The average price of a flat in Belgravia is £399,875 compared to the national average of £114,488.
The fund will buy relatively cheap properties that need refurbishing. Improvements will be carried out and they will then be sold at a profit or rented out.
Property is becoming a popular form of investment as investors are wary of volatile global stockmarkets. This fund may be a useful alternative to clients who may be considering building up a buy-to-let portfolio, but who are unwilling to become landlords. It enables investors to have a stake in a range of properties which spreads the risk if some properties cannot be let or sold quickly.
However, this is a niche fund that is restricted to properties in the wealthier parts of central London. If there is not enough properties for it to buy or enough people to rent or buy the properties once they have been redeveloped, this could cause problems for investors.