March Newsletter: My Crystal Ball: The Great Reset
Dear friends,
There have been plenty of rumours flying around about the post-2020 world.
We are referring to it as 'The Great Reset'.
Despite the ongoing restrictions for many of us, early 2021 looks very different to late 2020, and gladly so. Biden and Harris are in, and Trump and Dominic Cummings are out. The vaccine programme is working better than we could have imagined - so far - and Bitcoin is hitting all time highs.
But if we zoom in further, what is happening in the UK property industry, and to be more exact, the prime central London sector?
Apart from people enjoying gardens, more space, leafier suburbs and the odd move to the home counties, what does the new world promise as we emerge from Lockdown #3?
Are we experiencing a reset, or the type of market interruption we have seen so many times before - albeit this time in unique and unprecedented ways?
My feeling is that it's a balance of both. We have not experienced anything like this before, but that doesn't mean that everything will change... we will just see various factors influencing the recovery in different ways. Here are a few of the reasons that my crystal ball tells me that recovery is on the cards... and soon:
1. people still prefer property to cash
Over the last quarter of a century, PCL owners have experienced on average 20% appreciation every five years. You may be able to find a fund or flashy investment with a stronger one-off yield in the short-term, but over 25 years it is a unique level of consistency (amounting to 500%), and London has become a mecca for these types of returns, and that level of security... more importantly would you prefer your money in the bank or a home that is fit for the new world? I think many people have decided not only that home is where the heart is - but it also needs to be where work and school is as well!
2. overseas investors promise summer action
Unlike in Lockdown #1, this time around the market has stayed open, which has meant people have been viewing and transacting all winter, albeit it at traditionally lower seasonal levels. Where the imbalance has been, is with overseas buyers - who have not braved these shores in nearly a year. Despite the possibility of technology-enabled remote viewings (which have mainly been a stop gap measure for UK buyers who know that, prior to making an offer, they can physically attend a viewing at least once) there are few overseas investors who would buy without seeing a property in person. For this reason, the pent-up demand is offshore, and I am told, chomping at the bit to transact, as soon as travel restrictions end. The overseas investment sector promises to be competitive from the outset, which will help the prime central London property market rebalance.
3. at this level of the market convenience is king
In PCL terms, I have often noticed that people move when they are ready - regardless of price. That's not to say that getting good value is not important - indeed it is the most important thing - however buyers understand that value as a concept is relative to the market. What this means is that convenience is the main factor, and price secondary. Let's say you get a new highly-paid post in London that starts in three months - you will buy a home to live in regardless of market conditions as you prepare for your new position. As soon as restrictions lift, I believe we will see a flurry of activity from people in such situations, who have been unable to buy since Covid hit. It has been inconvenient, and now it will be convenient... so whether the market opens up/down or same-same, these buyers will transact... as we often say at Homes One HQ, now is always a good time to buy... for someone!
4. currently, competition is low...
With all this talk of the overseas investor returning to these shores for the first time in a year, you would have thought the outlook was exclusively for the international investor, but that is not so, especially in the near-term. Until restrictions end in June, it has never been a better time to buy for British clients - until corridors of travel reopen, there is currently no international competition, and with Rishi Sunak's stamp duty break extended the potential for a very British spring market is upon us.
5. sooner or later, we will all go green
By 2035 it will be illegal to buy a diesel vehicle in the UK... but in reality most manufacturers will phase out diesel well ahead of that deadline, and introduce hybrid and all-electric models. I expect at some stage the property market to undergo similar changes. Buyers are more curious than ever about whether the buildings they are moving into are efficient or sustainable, and with progressively environmental messages coming from the top levels of state and government, I wonder how long it will be before new ecological standards are introduced across the board. Although Q-Anon style conspiracies are not to my taste, I don't think it is too far-fetched to link the pandemic and the climate crisis, via unsustainable living... let's hope we start to see consumer and systemic change happen in tandem, and quickly, to do our best to avoid such negative trends evolving further.
For more revelations, I will be back on the airwaves in April, with my Easter update!
When things reopen we will be back at The Pavilion in Kensington, and look forward to seeing you when you are in the area.
Between now and then, virtual viewings continue and we are open for business.
Stay safe and see you soon.
Warmly,
Karim