Intro 0:01
Welcome to the London Property podcast, your go-to source for navigating the complex and ever changing London real estate market. Our digital marketplace provides informative and educational content from industry leaders, through podcasts and videos. We cover various aspects of the real estate experience, including buying and selling finance, law, tax construction, design, and more. Join us as we delve into the latest trends and developments in the market and gain valuable insights from our panel of experts.

Farnaz Fazaipour 0:35
Hello, and welcome back to London Property – home of super prime. We’re doing our market research video today. And we’re welcoming back to the show Tom Bill who’s head of UK residential research.

Tom Bill 0:46
Hi!

Farnaz Fazaipour 0:47
And Marcus Dixon, who is the director of UK residential research at JLL.

Marcus Dixon 0:50
Great to be here.

Farnaz Fazaipour 0:51
And thank you to Liam Monaghan for hosting us here at the LCP headquarters. And looking forward to sharing some insight with us. So I’m going to just kick off by actually asking you all to tell us, in your own words, what do you think is next for the property market? Do we have to wait for the new normal to settle in before the activity starts? Or has the activity already started? So shall we start with Liam?

Liam Monaghan 1:23
Yeah, absolutely. I mean, we’re, we’re already starting to see rumblings of the market taking off. Anecdotally, we’re seeing sort of increases in inquiries from from buyers. And the market is sort of the prime central London market especially, it’s almost been like someone standing on a hose pipe, the demand has always been there. But the pressure is swelling in behind. And the lack of activity is it’s something that can obviously be pushed on forward into the coming coming spring market. And yes, we hope this will continue.

Farnaz Fazaipour 1:59
And Marcus, with all the new data that you’re now in charge of JLL. What’s it looking like for you?

Marcus Dixon 2:06
Well, I think the probably the answer now is slightly different from the answer that maybe I would have given you back in sort of October, November last year, I think things have settled. And we’re certainly sort of a bit more positive about the market now than we certainly were a few months back, it doesn’t look like interest rates necessarily going to get to the sort of levels that we were maybe fearing towards the end of last year. But actually, I mean, in terms of of activity, we’re seeing sort of a really, I guess, a bit of a return to some kind of normality. What’s what’s slightly difficult at the moment is we’re comparing often back with 2022 and 2021, which weren’t sort of, quote unquote, normal years, there were, there was a lot of settlement back after, after the pandemic, there was various sort of stamp duty advantages in 2021, which meant that lots of things were distorted. And we’re now starting to see things settle back. So things like applicant numbers that we’re getting coming through for our prime central London offices, as similar to the kind of levels we were seeing sort of 2017 2018 2019. So not not necessarily quite as busy as last year. But there’s still activity in the market, people are still returning, and particularly on the overseas side. I mean, if you look at some of the the transport figures that are coming through that Heathrow passenger numbers that we always quote, actually, we’re almost back to 2019 levels. And so we’re starting to see those overseas buyers come back into the market, which is really important for sort of a fully functioning prime central London.

Farnaz Fazaipour 3:30
Yeah, no, couldn’t agree more. And what about you, Tom?

Tom Bill 3:34
I think it’s fair to say the markets taken most people by surprise, this year had a pretty rapey last few months of last year due to the mini budget. And it’s still I think, recovering from from what happened there and what happened to mortgage rates. It feels like quite a prolonged hangover for the for the UK housing market. But in prime central London and prime parts of London at the moment, I think we’re in a sort of almost a bit of a limbo waiting for the spring or waiting to see quite how much momentum there is in the market quite how sustainable all this activity is, because it is pretty strong at the moment, we’re seeing a bit of a difference between what’s happening at the top end of the market, which is proportionately stronger than what’s happening in the bottom end. So that market there’s less reliant on debt, understandably is stronger in terms of the activity and the figures that we’re seeing applicants and exchanges. But I think come the spring, that’s when the the market as a whole in London, the prime on the market, if you like will be properly put to the test. And I would suggest it’s probably going to pass the that that particular test. I think we’re in for a strong year. Our forecast just out today, actually, we’re thinking prime London is going to outperform most of the rest of the country over over the next few years. It’s had a pretty quiet pandemic. But there’s a big recovery there’s all sorts of reasons that we think there’s going to go they’re going to underpin the market.

Farnaz Fazaipour 4:52
And are you seeing new wealth coming from somewhere or old wealth reigniting what, what where do you see the demand coming from?

Tom Bill 5:00
I think what we’re seeing at the moment is a lot of interest from the Middle East, from North America, from Europe. Less so from mainland China, I would say that’s, I think that’s just due to the travel restrictions that have been in place, it’s coming back. But at the moment, though, those I suppose are the dominant areas of where we’re seeing it coming from. A little bit of new wealth, a little bit out of Latin America, and nothing that’s really kind of moving the needle, particularly, it seems to be, you know, it’s that great spread of nationalities that come to London to buy. And that’s part of its strength. And that’s, as a whole, as Marcus said, it’s sort of picking up and we’re seeing that the sort of people arriving in the country.

Farnaz Fazaipour 5:38
And Liam, your firm traditionally have done a lot of investment for people from Hong Kong, China, Singapore, etc. And that market went kind of flat for a bit.

Liam Monaghan 5:52
Yeah, well, it’s obviously as the guys said, the travel, the travel is starting to increase the Heathrow numbers are showing in December, there was a bit of an uptick in, in travel in bands from Far East Asia. Obviously, lock downs, hopefully are a thing of the past globally, but we’ll see how that we’ll see how that pans out. But we’re starting to see especially especially clients from Hong Kong having a foothold in, in both countries, this is a bit of uncertainty over over what’s going on with Mainland China. So it’s actually a lot more of that investment. And to backup what Tom said, the dollar denominated clients in the in the Middle East, and in North America, we started seeing an increase whereby they would usually have been the tenants of old because of what would have been seen by the IRS during their tax position. But with the exchange rate being so favourable still, and we are still down on 2015 peaks, I think, roughly, it’s about an 18% discount on where we were at that 2015 peak if you’re a US buyer, so the tax hits aren’t as severe. So we’re definitely seeing that as a as a big market for us currently.

Farnaz Fazaipour 6:56
And you’re not seeing any kind of new rental investment, investment types, looking at the market.

Liam Monaghan 7:04
I mean, we we have always had overseas investment, we did have quite a big increase on the domestic side of things since since the pandemic, for obvious reasons. But they were mainly on the homeowner side people looking for their own home or appeared to. Obviously it wasn’t people were looking for houses and the housing markets pretty much stayed flat. But now we’re starting to see a bit of a rebirth of the of the flat as people return back into it be closer to the office not commuting in from the community belt.

Farnaz Fazaipour 7:36
And Marcus, how about you? Are you noticing any new wealth coming from? Or is it all traditional?

Marcus Dixon 7:44
It’s, I mean, in terms of if you look down the spreadsheet of who’s buying the most in terms of overseas buyers, it’s the same countries that pop up again and again. So it’s, it’s it’s mainland China, it’s Hong Kong, it’s India, it’s it’s it’s North America, within, you know, a bit of a split between we’ve seen some Malaysian investment coming across, but it is sort of the usual suspects in terms of the people that are buying. There’s obviously the currency advantage, which, you know, is is is sort of slightly old news, you know, that actually currency has been pretty favourable for quite a long time. But it but for those people coming in, it’s sort of adds that little bit of an added incentive. I guess that you know, what’s interesting is in terms of now that those people are able to travel, also, the student numbers are really ratcheting back up in terms of overseas students, and quite a lot of, particularly in our new homes business, a lot of the investment that we see is is often sort of slightly linked to that student market. So they’re either buying for their children when they’re studying here, or they’re buying in anticipation that their their nine year old, who’s at boarding school in the UK will study in London, and that home is ready for them when they do so I think that sort of student market has been something that that’s been really important. And we’re now starting to see a lot of those people who applied and sort of 2019 2020 2021 are actually taking up those places and are coming across. But yeah, in terms of, it is the usual it is I mean, I guess probably of our overseas buyers, about 50% are from either Mainland China or Hong Kong, with India and the US being sort of the next ones down. So they’re still even though they’ve fallen back a bit because of the restrictions. They’re still the ones who are buying the most certainly on the new home side.

Farnaz Fazaipour 9:28
And are you seeing Tom any kind of pattern in what types of properties are in high demand and what types of properties are not in high demand?

Tom Bill 9:39
I think we’re just moving back to a normal situation in terms of the people aren’t particularly bothered when they still are this people still want space and greenery and, but flats and houses. I think that’s coming much more back into balance in the way that it used to be. I think the the race for space that we saw during the pandemic has calmed right down. We’re seeing that At sort of across the country, people seem to be gravitating back towards London. And what that means for the prime centre on the market is becoming more and more agnostic about whether it’s a flat or, or a house, I’m sure there’s still some desire to say, roof terraces or access to communal gardens, those sorts of boxes that people like to take. But generally speaking, it’s sort of back moving back to where it was, which is probably shouldn’t be a surprise for anybody.

Farnaz Fazaipour 10:25
So Liam, you already touched on the subject that, you know, you’re seeing more people going back to flats? If you were to talk to an investor and say, If I were you, this is what I would do. What would that be? When it comes to, you know, demand for properties? Which way would you feel?

Liam Monaghan 10:44
I mean, there’s there’s two different ways to break that down. It’s obviously looking at the rental investment side of things, which is been our bread and butter over the 30 years that that since since I found a name, you set up the company, it’s always smaller is better, and that still are still what we go to and looking in the areas that still do to improve around prime central London. So your Bayswater’s and your Pimlico’s, there’s still some really good deals to be had in those locations. And still looking at Heritage properties and still looking at ways you can improve, especially in those sort of areas, you’ve got lots of property that hasn’t been touched for sort of 40-50 years, and you can really put some value add and add to the add to the sort of capital value of a property and help it grow in the in the best way when things move forward. And in terms of people looking for their own property, it’s just trying to find the right sort of property within their within their budget and timeframes. And so many different types of people coming over wanting all different types of property, and it’s all just about finding them and helping them settle in the right sort of area within within London.

Farnaz Fazaipour 11:46
Yeah. And Marcus, your data, is it showing any kind of hotspots, apart from the Pimlico and the Bayswater that Liam has just told us about? But are you seeing any hotspots for property types, prop areas?

Marcus Dixon 11:58
I mean, I guess the sort of, I completely agree with Tom in terms of this sort of it returning demand returning slightly back to normality. And so I guess some of the areas that maybe didn’t suit the kind of race for space, outside space, big family house locations, somewhere like South Kensington, for example, we could see something back in, you know, if you look at the performance of somewhere like South Ken compared with something like St. John’s Wort over the last three years, St. John’s would hugely outperformed in terms of price growth, because it just ticked a lot of those boxes, like Notting Hill in terms of, you know, leave the big houses. Whereas, you know, possibly people sort of overlooked somewhere like South Kensington, I would imagine that we were going to see demand sort of starting to come back. So in that sort of window of opportunity, some of those more sort of central areas, at the same would sort of Knightsbridge, Belgravia that maybe sort of slightly have fallen out of fashion in terms of what people might want at the moment, could be a good thing to look at. I mean, the other thing, now, going back to what Liam was saying is that we’ve seen is, there’s been a real race for sort of newly newly modernised, renovated stock, and actually people not really wanting to look at sort of projects across London, partly because of, you know, the the cost of materials, finding a builder, all of this sort of stuff, which has been a real challenge. But that doesn’t mean that there’s, you know, a widening gap between those two and actually, possibly now could be the time to revisit some of those projects where you can add value. So I think, you know, and that’s probably that, that that would that would happen across London. But I think some of those sort of more central areas where they haven’t seen that sort of that post pandemic increase in value could be could be worth looking at in the sort of the short term.

Farnaz Fazaipour 13:39
Before I move on to the second part of our discussion, which I’m going to call “The Rental Dilemma”, is there anything you guys wanted to add to what we’ve discussed so far, or that we haven’t covered?

Tom Bill 13:51
We’ve covered quite a lot I’ve just done in addition to Marcus’s last point there, the two areas of London where we’ve seen the strongest price growth over the last year, or South Ken, and Knightsbridge, so both quite predominantly flat market. So they come in very much back onto the radar, I’d say. So it’s been through people looking forward into what’s driving them things of value there is bound to be found in those sorts of markets. And that’s, that’s what we’re seeing on the ground at the moment.

Farnaz Fazaipour 14:18
Okay, well, thank you all very much.

Outro 14:20
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