The Channel Islands’ property market has enjoyed a strong couple of years. Average residential property prices have increased substantially, with Jersey seeing the largest rise: up 18% from £567,000 in Q4 2020 to £673,000 in Q4 2021, compared with a 9% rise in the UK over the same period.
Supply has long been tight, and with a growing number of people and businesses relocating and investing offshore, it is only going to get tighter.
In the same vein, a quirk of the Guernsey housing market is that only 1,596 homes are ‘open market’, meaning they can be occupied by persons not entitled to live in ‘local market’ accommodation. As a limited supply, they are valued accordingly, which has contributed to a major rise in prices – earlier this year the most expensive home ever sold in Guernsey reached more than £15m. Demand in all aspects of the market has been so high that developers in Jersey have had potential buyers queuing overnight for the launches of flats in St Helier.
The investment opportunity is also increasingly attracting attention. Investors can acquire a good office, let to a strong tenant with an eight to 12-year weighted average unexpired lease term, off a yield of circa 6% versus 3% to 4% for the same characteristics in London, delivering the equivalent tenant at better value. This has seen international investors attracted to the Channel Islands, complementing domestic clients who additionally invest and develop UK and Channel Islands commercial real estate.
The Channel Islands’ attraction as stable investment jurisdictions is clear
On the demand side, this remains strong, with offices with large floorplates and BREEAM ‘Excellent’ ratings scarce in Jersey and Guernsey. Often grade-A space is delivered through the refurbishment of grade-B and grade-C space.
The Channel Islands’ attraction as stable equivalent investment jurisdictions is clear. With a Standard & Poor’s credit rating of AA-/A-1+ for both islands and an estimated GDP of £3.25bn in Guernsey and £4.52bn in Jersey, the islands’ status as globally recognised offshore finance economies is predicated on their world-class professional services, robust regulatory regimes, tax neutrality, skilled workforces and agile, pro-business governments.
Similarly, the appeal of UK real estate is as strong as ever for offshore investors and we have supported many clients in accessing investment opportunities across multiple real estate segments throughout lockdowns and beyond.
Despite their island status, the Channel Islands haven’t been immune to the upheaval caused by the pandemic. For us, adaptability and close client relationships have been key to supporting clients both on and offshore. Navigating tenant stress, halted developments and delivering on solid opportunities to invest in the strongest market volumes seen in recent times, we and our offshore-structured clients have been busy.
In 2021, the Investec Channel Islands team had a record year, providing more than £150m of investment and development finance for Channel Islands and UK real estate. We navigated the economic consequences of Covid in a way that compared favourably with other jurisdictions. As increasing amounts of external money eyes up the local market, and with its appeal as an offshore jurisdiction as strong as ever, we are bullish on the outlook for 2022.
Jane Niles is head of real estate, offshore, at Investec