The Welsh dairy farmers who bought 320 buy-to-let properties in Sweden
03-17-2014
Dismayed by 'poor value' pensions, three farmers banded together to build an empire - out of Swedish apartments
Residential property in Swedish cities like Gothenburg is mainly rented, not owned, by the occupiers
By Richard Dyson
Their search for a better alternative to a traditional pension took three south Wales farmers to Lithuania, and from there to Sweden.
Now they are so certain they have found the key to a reliable, inflation-proof income that they have turned it into an investment business to sell to others.
Evanridge Properties is the latest of a number of residential property-related investments to be marketed at private investors. Its name derives from those of its founders, dairy farmers Nigel Evans and Bill Ridge, and their accountant Huw Evans.
By the early years of this century the three men had bought a number of buy-to-let properties between them, mainly in south Wales towns such as Port Talbot and Carmarthen.
Nigel Evans explained: “We sat around the kitchen table one day and agreed that traditional pensions and other investments weren’t good value.” They also invested together in commercial properties, but by 2005, with prices in Britain having risen strongly, they felt they needed to look for returns further afield. They were less interested in rapid capital growth than in a steady, inflation-beating income stream.
“We thought of eastern Europe and made some trips to Lithuania,” said Mr Evans, pictured. “But it wasn’t quite right.”
Shortly afterwards they settled on Sweden where, like other northern European countries, most people rent their homes. Sweden’s housing market is strictly regulated and, with most of the population living in large, multi-property blocks, investors cannot buy individual properties piecemeal. Rents are controlled, but are linked to inflation, and landlords have strict obligations to provide quality accommodation.
As in Germany, most property is valued below its rebuild cost – in Sweden by about 20pc, said Mr Evans. A spacious two-bedroom flat in Gothenburg with a new kitchen would cost £90,000, he said, and could be let for about £11,000 a year, or a yield before costs of 12pc. The after-cost yield is nearer 6pc.
“At first a very regulated market seems negative, but actually it brings stability and more certainty,” he said.
Since 2006 the three men have bought 320 apartments, mainly in and around Gothenburg. Of the 200 active investors through Evanridge, 85pc are British farmers, Mr Evans said.
Evanridge is now widening its offer to any investors prepared to commit a minimum of £50,000. Their investments will buy them shares in a Swedish public limited company, whose sole purpose will be to buy further properties to generate a mix of income and capital growth.
The investment is not authorised in the UK and so shareholders would have no recourse to the authorities here, or the Financial Services Compensation Scheme, if some or all of their money was lost.
Aside from that risk, most financial planners would caution against investing large proportions of total wealth into residential property – especially when for many families their home is already their most valuable asset.
Yet the surge in property values, and the craze for buy-to-let, which has created an army of 1.4 million private landlords, has led to a number of residential property funds being launched in recent years.
Last week, Money reported on the fourth property fund to be launched by London Central Portfolio (LCP), which focuses only on buying small flats in the ultra-central – and ultra-expensive – London postcodes around Hyde Park. The proposed £100m fund will buy and let scores of flats but seek to gain mainly from an increase in the properties’ value, predicted to continue at its historic 9pc annual growth rate.
The aim is to sell the portfolio of properties to an institution in five to seven years, returning cash and profit to investors. A minimum £25,000 investment is required. The fund, not regulated on the mainland, will be listed in the Channel Islands, and qualifies as an Isa or pension holding. LCP has three other portfolios under management and oversees about £600m of property. A more comprehensive analysis can be read here.
The Hearthstone UK Residential Property fund is a fully regulated fund, also qualifying for inclusion within Isas and pensions, which aims to track returns delivered by the wider UK residential market. There is no minimum investment. Performance in the fund’s first year has been mediocre. The £28m portfolio, which owns 111 properties nationwide, returned just under 5pc in the year to January 31, less than most measures of house price growth. The Halifax index, for instance, recorded annual growth to January of 7.3pc.
For a minimum £1,000, investors could buy a “HouSA” from new provider Castle Trust. This promises to track the Halifax house price index over a five-year term, with the original investment guaranteed to be returned at maturity, even if house prices fall. Castle Trust’s first HouSAs were launched in late 2012, since when they have delivered growth of between 10pc and 11pc.
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