Are we seeing a mass exodus from London and will prices fall?
The press is full of reports about how the country market is exceptionally busy.
We are told that people are fleeing London in search of the rural idyll.
After all, who needs to go to the office nowadays? So why stay in London especially when many shops, restaurants, clubs and theatres are still closed?
Well, the country market is busy of that there is no doubt. And there are definitely people who are moving to the countryside who wouldn’t have considered it a year ago.
However, would it be unfair to suggest that quite a lot of the recent purchases are being made by people who had been planning to move for some time, but had put their plans on hold due to the political buffoonery we have seen over the last few years? After all we had:
- The uncertainty caused by the Brexit Referendum
- An election resulting in a hung parliament
- Tory infighting and blithering
- The spectre of Corbyn and the potential for a far-left government
Of course, much of that uncertainty was eradicated with the massive Conservative victory in December and property prices went up immediately. They then fell back with the onset of the pandemic and lockdown.
However, since the end of lockdown, domestic markets in London, e.g. Notting Hill, Chiswick, Fulham, Battersea, etc, have been very busy. Meanwhile, prime central London (PCL) has been relatively quiet due to the travel restrictions and the pundits are once again saying that prices in PCL will fall considerably.
But what will happen when a vaccine is found & people can travel again?
Because what the pundits seem to have overlooked is that there is:
- An astonishing amount of money sitting on the side lines.
- Low interest rates
- Continued QE at unprecedented levels
The pandemic has not affected everyone equally and the wealthy are sitting on huge sums of cash that they want to deploy as they are aware that governments globally are devaluing their currencies. This will benefit most assets, but especially property in the best locations.
And PCL is looking very attractive. Not only have we seen prices fall over the last five years, but sterling weakness means that properties are selling for between 30-40% less in Euro and Dollar terms than at the last peak.
So, while the outlook seems dire right now, the fundamentals at the top end of the market are extremely strong.
And for those who think we are on the verge of another 2008 or some of the rather hysterical predictions of another Great Depression, they are in for a surprise because the financial system is in a very different place.
In the run up to both those crashes (the early 2000’s and the “Roaring 20’s) everyone was fully invested and geared up to the eyeballs. The belief was that prices could only go up and everyone was at the casino. Individuals, companies and banks were all highly geared.
Right now, the situation is the complete opposite and much more similar to 2001. UK & US banks are well capitalised and prepared for this after 8 years of stress tests. In addition, banking regulations are still strict and, as mentioned, there are trillions of dollars sitting on the side lines.
This will change as it always does.
Politicians are under pressure to boost the economy so they will take the path of least resistance and continue to print money with the backing of Modern Monetary Theory. Interest rates will remain low. But most importantly of all, they will relax banking regulations to boost the velocity of money and kick start their economies.
It will do this, but the real effect will be seen in asset prices which will soar to heights that seem impossible now. Just as 2007 prices seemed impossible in 2001 and 1989 prices seemed impossible in 1983, etc., etc.
Buffett is famous for saying “be greedy when others are fearful”. Now is that time, but does that mean that you should rush out to your nearest estate agent and start buying property with wild abandon?
Of course not. Buffet has also said “It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price” and the same is absolutely true for property. You must be selective.
Jeremy McGivern – Founder of Mercury Homesearch
If you would like to discover how to take advantage of this buyer’s market, you can request a complimentary copy of Jeremy's book, The Insider’s Guide To Acquiring Luxury Property in London, by emailing email@example.com or calling 02034578855 (+442034578855 from outside the UK) and quoting “Private Finance”.
Jeremy is the leading expert on acquiring residential property in prime central London and the author of The Insider’s Guide To Acquire £1m-£100m Property in London. He has personally inspected over 20,000 properties and seen the details of over 153,400 more. He founded Mercury Homesearch in 2001 because he was frustrated by the advice he was receiving from estate agents.
Jeremy has featured on Bloomberg Television, CNBC, Reuters, Forbes, The Financial Times, The Sunday Times, MoneyWeek & BusinessWeek amongst others. He is also an internationally recognised speaker having given talks for firms of solicitors, accountants, private banks and multi-family offices in London, India, Hong Kong and the UAE.
He has helped many of the world’s most successful families and businesspeople find their ideal homes and investments while negotiating prices that they hadn’t thought possible through his knowledge of the market & negotiation techniques.