BREXIT AND THE WINDOW OF OPPORTUNITY

Written by abuther Al Saraj (Director)
Thursday 9th July 2020

The Collaborative London is a specialist residential property development company fully focused on securing lucrative distressed property in Prime Central London (PCL). We have a combined property market experience of over 35 years and a proven track record of securing some of the best property deals in Central London. 

There is no doubt that Brexit has created a climate of uncertainty, which has affected prices of property in Prime Central London. 

In this article, we have analysed what the effects of Brexit are on the PCL property market so far and outline our view of where the market will be heading.

 

Property Market after General Elections

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There were indications that the dark clouds of uncertainty were beginning to lift with the General election which saw a Conservative government re-elected with Boris Johnson as its leader in December 2019. This was an indication to the market that the impasse on Brexit has lifted and the reaction was apparent as the property prices in London rose significantly. 

The Rightmove house price report, which tracked average asking prices in the London from mid-December, saw the most significant monthly rise ever recorded in January, pushing the average to £612,500 – an increase of 2.1 per cent.

 

Britain-Exit

The UK finally exited the European Union on 31st January 2020 following which they will have an 11-month transition period where they will stay in the Single Market and Customs Union until the end of the year to allow time for trade negotiations.  

The trade negotiations can go either way. There can either be a tough Brexit or a softer style Brexit with an agreed trade agreement. In either case, property prices have already factored in for the Brexit uncertainty and for the taxation changes which have taken place over the last five years. (In figure 2 we see that Prime Central London Per square foot values in 2019 compared to the five-year average showing a discount in prices). 

The uncertainty factor in the market can be seen from the relative certainty which came post the general elections as overall sales in prime central London was 14% higher in 2019 than in 2018. They were also the highest Annual total since 2014 (Source Knight Frank Report). The reasons for this increase in activity came from mainly a relatively slow global economic backdrop, ultra-low mortgage rates and that prices discounted to take into account the uncertainty and change.

 

Investing in London

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Despite the doom and gloom in the market currently, London remains the capital of Safe Havens where International high net worth investing in storing wealth. 

Furthermore, London’s Economic fundamentals mean that it has been able to weather the storms of the past just as it will overcome the clouds of Brexit which have loomed over property prices.

As the storm passes and certainty begins to take hold the opportunities for great deals will become diminished. Knight Frank has predicted that in prime Central London property prices will increase by 18.5% cumulatively in the five years up to 2024. 

Pent up demand may also be released in the short term as in second quarter of 2021 new stamp duty changes are introduced which mean that it will become more expensive for overseas buyers to buy property in Central London. 

The Collaborative London’s View

At The Collaborative London, we view the current economic uncertainty as a window of opportunity as we can secure the highest discounts and opportunities to our partners. We have the expertise, experience and network to be able to select and develop properties in Central London which have a resilient value and can withstand the turbulence in the market. We focus on buying lucrative distressed properties in prime Central London which can be developed and sold within two years. 

We are not just interested in waiting for market increases; it is for this reason that we always price in the future sale value at today’s prices, which means that as the market improves the profit element increases. 

‘Don’t wait to buy real estate. Buy real estate and wait’. – Bill Rogers 

Those who take advantage of this period of uncertainty will make the most profit. We strongly advise our property investment clients to buy in this market but with a few rules: negotiate well, buy-in strategic locations and try to take advantage of cheap finance.

In March 2020 Brexit was thrown into the shadows by an even more significant threat the COVID-19 virus, this has put Brexit on a political back burner as dealing with the COVID crisis becomes the Government’s priority. To read more about what the effects of COVID will be on Central London house prices, please refer to my college Jaffar Al Saraj article.   

Get In Touch

The Collaborative London is fully adhering to the government guidelines surrounding COVID19. 

Following the government guidelines released on the 13th May 2020, we can confirm that we are now back at work and fully compliant with the social distancing measures required. 

We are keen to purchase lucrative deals for our Collaborative partners and welcome you to book in for any property viewings. If you want to discuss PCL property investment get in touch and let’s talk property.

In the meantime, stay alert and stay safe.

THE COLLABORATIVE LONDON ON COVID-19

Written by Jaffar Al Saraj (Director)
Thursday 28th May 2020

The Collaborative London is a specialist residential property development company fully focused on securing lucrative distressed property in Prime Central London (PCL). We have a combined property market experience of over 35 years and a proven track record of securing some of the best property deals in Central London. 

Over the years, we have overcome many challenges affecting the London property market, including the Global Financial Crisis of 2008 and the uncertainty created by Brexit in 2016. We are now faced with the 2019-2020 pandemic caused by the Coronavirus (COVID-19), which has presented a unique set of challenges.

In this article, we have analysed what the effects of the pandemic are on the PCL property market so far and outline our view of where the market will be heading.

 

Property Market Pre-COVID19 

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The political certainty caused by the results of the general election boosted both activity and prices in the PCL property market, with the number of sales the highest since April 2014.

The Office of National Statistics (ONS) last week confirmed that house prices in Greater London went up by 4.7%, which is the strongest annual growth rate since 2016. Furthermore, the number of sales in the PCL property market was 14% higher than in 2018 and the highest annual total since 2014.

On the ground, we felt the acceleration in the property market (sometimes referred to as ‘Boris bounce’). I personally remember being in Kuwait at the end of January 2020 after having completed a transaction on a luxury flat in Kensington, which was purchased for £1.7M and immediately receiving an offer for £2M.

The PCL property market was in a strong position going into COVID-19 with 10 buyers for every new property listed, that being the highest ratio for 15 years.

Prime Central London vs COVID-19

What we expect the market to be post-COVID-19 will be a little speculative but we have tried to back up our views with reports from both Knight Frank and Savills as well as official data.

The key indicators to what the PCL market will look like post-COVID-19 will be driven first and foremost by the shape of the economic downturn.
Most economic forecasters have the view that we will see a short and sharp downturn followed by a swift recovery in the second half of the year. The shape of the downturn is outlined in the graph below prepared by the ONS and Office for Budget Responsibility (OBR). 

Price Waterhouse Coopers scenario for 2020 is less negative predicting only a 13% fall in 2020 compared to the 35% drop mentioned by the OBR, which PWC calls an ‘extreme assumption’.

Factors That Will Help The Property Market Recover

1.  Bank of England slashing interest rates, which as of 7th May was maintained at a record low level of 0.1%. There are even rumours of interest rates going to 0% and this will encourage investors to borrow cheap money. 

2.  The UK Government was extremely swift in introducing the furlough scheme. Under the scheme announced by Chancellor, employers can claim a grant covering 80% of the wages for a furloughed employee, subject to a cap of £2,500 a month, this scheme has now been extended till October.    

3.  The introduction of a 3-month Mortgage Holiday Scheme, which according to UK Finance, 1 in 9 British homeowners have taken advantage of.    

4.  The weak pound will also help attract foreign investors. See below a graph showing the pound to the dollar exchange rate, showing the pound trading significantly below its usual level. 

The UK after lockdown

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The UK Prime Minister has confirmed we are moving to phase 2 of the UK plan for COVID-19, which includes the partial reopening of schools and non-essential shops in June 2020. In the meantime, estate agents and housebuilders are back to work with social distancing measures in place.

What is exciting is that following the ease of lockdown restrictions both Knight Frank and Savills have seen increases in enquiries by 8 and 10% respectfully and we have already seen an increase in property transactions taking place. 

The mortgage market is also returning to more normality with lenders keen to re-establish a pipeline of new business.

The Collaborative London’s View

At this moment, it is difficult to make any bold predictions, but we should not let negative speculations overshadow the positive performance of the PCL property market displayed at the beginning of the year. 

If Brexit has taught us anything, investors will only act confidently once certainty has returned to the market. This view is shared by Savills which states ‘it remains confident that average UK property prices will increase 15% by 2024 even with the uncertainty surrounding COVID-19’. This is an impressive rate of growth. 

Knight Frank forecasts prices in PCL property market remaining unchanged following a 25% repricing since 2014 to take into account the various uncertainties in the market most notably Brexit. The Collaborative London shares the same views as Knight Frank and expects prices to recover sharply in 2021 and also predicting an 8% growth for PCL property prices for next year. 

The Coronavirus pandemic is now past its peak but as with any period of uncertainty it has created is a huge window of opportunity to purchase PCL property.

‘Don’t wait to buy real estate. Buy real estate and wait’. – Bill Rogers 

Those who take advantage of this period of uncertainty will make the most profit. We strongly advise our property investment clients to buy in this market but with a few rules: negotiate well, buy-in strategic locations and try to take advantage of cheap finance.

Two Historical Prime Central London Property Facts:

1. Over the past 25 years, PCL property prices have increased by 458%. 

2. The PCL Property is hands down the best performing asset class performing better than stocks, shares and commodities according to our partners at Knight Frank.

 

Source Knight Frank

Get In Touch

The Collaborative London is fully adhering to the government guidelines surrounding COVID19. 

Following the government guidelines released on the 13th May 2020, we can confirm that we are now back at work and fully compliant with the social distancing measures required. 

We are keen to purchase lucrative deals for our Collaborative partners and welcome you to book in for any property viewings. If you want to discuss PCL property investment get in touch and let’s talk property.

In the meantime, stay alert and stay safe.