THE BIGGEST MISTAKE YOU WILL MAKE ON PROPERTY PRICES THIS YEAR
Happy New Year.
Serena and the kids have sent me back to work. I am no longer welcome at home during the day as they have decided they have seen far too much of me over the last couple of weeks! They wanted to enjoy the rest of the school holidays in peace… Charming!
And I am looking forward to this year as I know there won’t be an election and Brexit will finally happen in one form or another, which means that the political purgatory is nearly over even if the shenanigans aren’t.
Meanwhile, the Conservatives’ huge victory in the election has led to an immediate bounce in the confidence of the estate agents and sellers. But is this justified?
Well, last year we saw buyer numbers increase dramatically – some agents were reporting buyer numbers up by 30% - and that was several months before the election. I don’t think it is unreasonable to expect this trend to continue.
However, I don’t think that this increase in demand will lead to a large rise in prices across the board, because there has also been a shortage of new properties coming to the market as sellers were nervous (there are very few desperate sellers although there have certainly been some great opportunities which we have bought for our clients).
Now, that there is perceived certainty and a touch more confidence, there is likely to be a noticeable increase in the number of properties available for sale. This will temper price rises, so while the indices will start to show price increases, I don’t expect them to show rises of much more than a few percent.
BUT, CAN YOU TRUST THE INDICES?
“When your head is in a refrigerator and your feet on a burner, the average temperature is okay. I am always cautious about averages.” Andrew Robinson CEO of BBDO
I know I bore on about this point, but I make no apology because it is so important:
The information you read in the press and the indices is too general. What happens in the £1m market in South Kensington is different to the £5m market and £10m+ market in South Kensington, which are in turn different to all the other areas.
Is the general information in the indices really of any use to you?
Would it be unfair to suggest that the indices are, in fact, dangerously misleading?
So, you need to focus on much more detailed information and you must also remember that in any given area and price range, there are properties that will outperform. Again, I have used this research from Savills before:
“Between 2005 and 2013 the top decile of properties in PCL increased by 190% while the bottom 10% only increased by 63%”.
So, while I expect the London market as a whole to only go up by a few percentage points this year, there are certain properties in certain price ranges which will see significant price increases. These are the properties that fall into our “best in breed” strategy and are the ones that you want to buy before the masses catch on.
Think about it. Most people who want to acquire a property this year are more confident than they have been over the last couple of years. However, there is still a degree of caution and circumspection, because we are some way from the irrational exuberance we always see at the peak of the cycle (although it will happen in years to come). Consequently, most buyers will focus on the best properties rather than buying indiscriminately.
And as there aren’t many “best in breed” properties, there will be a significant supply/demand imbalance which will push the prices of these properties higher than the rest of the market. It has always been thus, which is why you want to acquire one of these best in breed properties that will outperform.
Unfortunately, most buyers will sit on their hands thinking that they can afford to watch and wait because they will be looking at the price indices and assuming that the small increase in values is across the board, when in fact the best properties will be increasing significantly.
It often takes years for people to realise what is happening. In the talks I give for private banks, law firms and tax advisers, I take extracts from newspaper articles between 2000 and 2005 to show how the press were reporting that the market was in trouble despite the fact that it was actually going up and the best properties were increasing in value significantly!
Then when it’s too late, the herd jumps into the market which causes the “crack up boom” in prices that we saw in 2006 and 2007, 1998 and 1989 and every other property cycle before that.
Would it be idiotic to suggest that you might want to acquire a property before the big boom in prices, while everyone else is sitting on the sidelines because they are relying on false data & being wrongly influenced by the news (how many people thought that Corbyn would win the election!!)?
Would it be unreasonable to suggest that those who bought in 2001 did better than those who waited… even though the “experts” in the press and conventional wisdom would have told you that it was a terrible time to buy (think the dotcom crash and 9/11)?
Do you want to miss out on these best opportunities?
I occasionally receive letters saying that I am too pushy in suggesting that you take action. They always come from people who have no knowledge of the history of the property market and who have spent years waiting for a gigantic crash (apparently 2008 wasn’t big enough) because they feel prices are too high.
Prices have always seemed too high and yet they keep increasing every cycle. Likewise, London continues to expand as do the surrounding areas. That is what happens in successful and thriving cities; it is how they evolve.
This doesn’t mean that prices only go up in a straight line. In fact, the cycle is one of boom and bust – each as inevitable as the other. Right now, we are just entering the second half of the cycle which history has proven will involve significant price rises.
Consequently, I think you should take action and I put my money where my mouth is by acquiring another property in London. I agree with the complainers that I am pushy about this… and it doesn’t matter whether you start looking yourself or ask me and my team to help. Just start!
Of course, this doesn’t mean you should rush out to your nearest estate agent and start buying property indiscriminately. You must be selective and wait for the right opportunity. It might appear next week or in six months’ time, but you will never know if you are not actively looking.
This is the exact advice I give our clients and is also why I have invented the worst business model ever: I spend the majority of my time advising clients not to buy because most properties simply aren’t good enough.
Indeed, I am sure some of my clients think I am actually on the beach rather than working because I spend weeks and often months telling them not to waste their time looking at the properties available (occasionally a client insists on viewing a property they have seen on the internet and, once we have shown them around, they agree that it was, indeed, rubbish – photos are often misleading…).
And by actively looking, I don’t mean looking at websites. Everyone else is doing that, so how do you expect to have an advantage? You must speak to the agents at least once a week and also source off-market properties.
Now, I know that this is time-consuming and, frankly, boring, but if you don’t undertake the necessary research and due diligence do you really expect to hear about the best opportunities let alone have first refusal on them?
And how much will it cost you if you don’t have a clear understanding of valuations and are only bidding on properties that will not outperform the market?
So, if you are serious about acquiring a property in London, please ensure that you follow the steps and strategies necessary to ensure that you acquire a “best in breed” property for the lowest price possible.
And if you don’t have the time or inclination to undertake the necessary steps, don’t worry, you are not alone.
If you would like to discover how we can help you just as we have helped some of the world’s most successful families and businesspeople acquire their ideal homes and investment opportunities for prices they often didn’t think were possible, simply email email@example.com or call 02034578855 (+442034578855 from outside the U.K.).
Whatever you decide, good luck and I would like to wish you and your family a happy, healthy and prosperous year.
WHO AM I AND WHY SHOULD YOU LISTEN TO ME?
My name is Jeremy McGivern. I am the founder of Mercury Homesearch, the internationally renowned property search consultancy, and author of The Insider’s Guide To Acquiring Luxury Property in Prime Central London. I have been acquiring property in prime central London for clients for over 13 years.
Having physically viewed over 22,000 properties in prime central London, studied the details of over 153,400 apartments, houses and investment opportunities and spoken to 232+ estate agents every week for over a decade, my advice is in high demand and has featured everywhere from Bloomberg Television, The Financial Times and The Daily Telegraph to Forbes India and Bahrain Confidential.
Please note that the strategies and techniques revealed in the book and CD’s are not just theory. They have been tested and proven over 13 years of acquiring hundreds of millions of pounds worth of prime London
property for my clients, who include some of the world’s wealthiest families and most successful entrepreneurs and business people - it may surprise you but over 30% of our clients are British and based in London so this information is relevant whether you have bought a property in London before or not.
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