Always look on the bright side of life

By Martin Skinner,

"Martin Skinner"

Martin Skinner

The last few weeks have been frantically busy and while lots of big deals are on the horizon, fundraising and transaction setbacks are still frequent and frustrating.

On the personal front I’ve just returned from a trip to New Zealand and best man duties at a close friend’s wedding.  In fact I wrote most of this on the long flight back, having written my speech at the last minute on the way over.  The big day was fabulous and was followed by a tour of the North Island together with Ben and Anna the newlyweds, their daughter Trilby (hats off to them for that name) and Ben’s family.  Some honeymoon! I was there when we heard the terrible news from the South Island and my heart goes out to everyone in Christchurch.

Ben & Anna take their vows led by Captain Barnaby

Ben & Anna's Wedding in New Zealand

While I was out there corrupt leaders were falling like dominoes as people harnessed the power of everyday web tools like Google, Facebook and Twitter.  The debate rages as to whether the situation will deteriorate without the ‘regional stability’ these leaders used to provide.  Personally I believe increased transparency and accountability will lead to better government in the long run and that must be a good thing.  Short to medium term the instability will increase the flow of capital out of regions like the Middle East and into safer environments such as prime and fringe prime London property.

In terms of the UK economy, discussion is finally turning towards growth. While the downside surely has to include rising interest rates, there is also much to be positive about.  David Smith recently published another superb piece describing how the ‘feel good factor’ was lost when consumer price inflation overtook wage inflation, an event that paradoxically contributed to higher employment and lower interest rates.  He also highlighted a report forecasting a return of the feel good factor next year, when broad inflation is expected to fall back below wage inflation once more.  At the same time, development luminary Mike Slade listed many more reasons to look on the bright side of property life in his recent Property Week article.

I’m sometimes accused of being optimistic as if that’s a bad thing.  Yes, I underestimated the credit crunch and agree it’s important not to get too carried away with wishful thinking.  At the same time, it’s also important to recognise the positive signs that are beginning to appear.  When I was playing a lot of tennis, we were always told to focus on where we wanted to hit the ball and it clearly improved results.  With timing and location critical to success in the property market too, I’m looking forward to some excellent years and returns ahead – particularly for investors in London residential.  As real estate emerges from the downturn, London’s diverse, much vaunted and ultimately proven strengths will continue to draw both investment and human capital in ever greater numbers.

Having just gone through a recent batch of reports from the big UK residential agencies, I thought the following key points and charts on London residential property were worth sharing:

“…an astounding 70% [or £2.9 trillion of the £4.1 trillion total market value of UK residential property] is held as equity”.

“…it is London’s status as a world city that sets it apart in value terms from the rest of the country.” Yolande Barnes, Savills, Residential Property Focus Q1 2011
Savills are now forecasting a rise of 33.4% in prime central London house prices over the next 5 years.  See the full report here.

How low levels of available housing stock have historically supported house prices

Available Stock vs Price Growth | Savills

“Outperforming their national markets, the cities of London, New York, Moscow and Hong Kong are sought after by the world’s richest households and are at the forefront of a truly global market ~ the residential sectors of these global cities have more in common with each other than they do their domestic markets” Yolande Barnes, Savills, Spotlight on Four Global Cities, Feb 2011  Read the full report here.

5 year performance, cities (executive unit) versus countries (national house price index)

5 Year City Performance | Savills

“Global economic growth is now running at pre-recession levels contributing to wealth creation around the world which is pouring into London again. ~ London’s reputation as a ‘safe-haven’ investment location, combined with geo-political concerns elsewhere around the world, most recently for example in Egypt and Tunisia [and now Libya], have helped draw buyers into the market”  Liam Bailey, Knight Frank, The world’s most desirable residential market: The Super-Prime London Report 2011

P.S. Check out www.beek.co This is recently married Ben Knill’s new and innovative technology venture and it’s shaping up to be a huge success!  I’m proud to say that we incorporated early versions of his interactive 3D walkthroughs on our consumer website Nice Room as early as 2003.  Prospective tenants loved it and we got a lot of remote bookings as a result.  As consumers increasingly shop online and seek comfort in online research before buying or travelling, its potential is enormous.

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Prime suburbs lead London market improvement

Date : 22 July 2009

Key headlines :

  • Prices across London’s prime suburban areas (including: Hampstead, Richmond, Wandsworth, Wimbledon and Fulham) rose by 3.7% in the three months to the end of June
  • This recent price rise means that annual price change has improved to -10%, from  -14% in March
  • Supply of new property is down by 40% year-on-year
  • The stock of new properties in the pipeline and coming to the market over the next two months is down 42% y-o-y
  • On the demand side, new purchasers are up by 33% y-o-y and viewing volumes are also up by 23% over the same period
  • Sales volumes have risen by 38% y-o-y (although they are still 29% below the level they were at in June 2009)
  • The improved market has had a marginally positive impact on the time taken to sell a property – which fell from 70 days to 63 days between March and June
  • Asking to achieved price ratios have improved slightly – but are still well below their level a year ago – in June the average ratio was 89% compared to 94% a year earlier
 
The residential market across London is beginning to benefit from stronger trading conditions. Prices are up by nearly 4% in the last three months. But the real pressure in the market can be seen from strong demand and weak supply which is acting to push prices higher.
 
Knight Frank’s research has revealed that it is the so called “prime suburbs” – where demand is picking up more strongly than the more affordable areas of the capital.
 
Liam Bailey, head of residential research, Knight Frank, commented: “We saw last year that the markets which were hit by the biggest price falls were the prime markets – the markets which traditionally appealed to bankers and City employees. When the economy in London began to contract, it was areas like Fulham and Wandsworth which initially took the hit in prices.
 
“In the last few months the market reaction has been that this discounting was overdone, and in fact far from the City economy being down and out – the view is that the central London economy will be one of the first parts of Europe to see a sustained recovery.
 
“Residential markets where central London’s high-earners want to live are the first to see recovery in pricing, demand and supply.” (Liam Bailey, Knight Frank Research) http://www.knightfrank.co.uk/news/Prime-suburbs-lead-London-market-improvement-043.aspx