How can you explain impossible house prices in London and the Hong Kong & Singapore effect?

In the second in our series about buying property in London, we talk to Jeremy McGivern, the Leading Expert on London Property, author of ‘The Insider’s Guide to Acquiring Luxury Property in London’ and Founder of Mercury Homesearch, London’s premier property search agency to find out what he has to say about seemingly impossible house prices!

“My mother-in-law came for lunch on Sunday.

She was reminiscing about her youth and the various places she lived when she was in London, UK in the 1960’s. One of these was 34 Montpelier Walk which is a three minutes’ stroll from Harrods.

She and a few friends rented the three bedroom house for £16 per week. That’s £16 per week in total – not each. So, if one used a 5% yield (about double today’s return), the house would have been worth £16,640.

I have checked my records on the house and in 1999 it sold for £715,000 (the house was 1238 sq.ft.). What do you think the owner of the house would have said in the 1960’s if you had told him/her that it would have gone up 43 times in value in 35 years? I expect that he/she would have assumed that you had received a blow to the head.

The house sold again last year. By this time, it had been extended to 1502 sq.ft. and updated further – it was bought for £3.2m or a rather more modest increase of 4.5 times the value from 1999. But what do you think the owner of the house in 1999 would have thought if you had suggested back then that the house would be worth over £3m?

Again, your sanity would have been questioned, especially if you had suggested it in 2001 after we had had the dotcom crash, recession and the horror of 9/11.

And by the way, the house would have cost under £200 to build in the 1820’s. Indeed, the street was originally called Montpelier Row and this extract from the Survey of London gives you a flavour for Knightsbridge of the time:

Early Victorian occupants of the Row included artisans, labourers, servants, sailors, soldiers, musicians, dressmakers, and laundresses; a similar pattern held throughout the rest of the reign. Several houses were let as apartments by the 1860s if not earlier. Inhabitants were overwhelmingly English, the few foreigners being mostly lodgers. They included (in 1871) a French actress, a Stockholm-born family of milliners and a couple of Italians – a tailor and a print-seller; and (in 1881) two German bakers and a French chef.”

It would appear the demographic has changed ever so slightly over the years! No doubt with each generation claiming that prices could not go higher, even though history has proven otherwise – despite wars, political parties of varying incompetence and various financial calamities, property prices have increased to levels that always seem implausible if not impossible.

The press and conventional wisdom will tell you that prices can’t go higher now. They have been saying this for centuries. Do you want to believe the talking heads who have not studied the history of the property market or do you want to look at the facts and make an informed decision?

The musicians, laundresses and servants were replaced by white collar workers, who in turn were displaced by wealthier professionals, who in turn have been replaced by bankers and wealthy international buyers.

When you consider that more people are making more money in more jurisdictions and at a faster rate than ever before, do you think that Knightsbridge and London in general is going to become less popular?

The Importance of Asia

In 1910, £1 bought you $4. The Hong Kong Dollar and the Singapore Dollar didn’t exist and European economies were relatively small. Meanwhile, Russia and China were not playing on the global stage in economic terms. In other words, there were only really two major economies.

So, although a house in Belgravia would cost you c. £25,000 it represented a huge sum of money on the global stage. Fast forward to today. That same house would cost c. £15m, but that is a much lower sum in terms of global wealth.

You just have to look at the vast wealth being created across Asia to see that this is true. Indeed, last year, for the first time ever, there were more billionaires in Asia than in the U.S., a trend which is accelerating as is the speed at which people are creating money.

Indeed, there are more people, making more money in more jurisdictions than at any time in history. However, there are still very few cities and other locations, e.g. the French Riviera, Aspen, etc. where people feel confident buying property. So, you will see price rises in the locations that the wealthy flock to across the globe and London will continue to be one of the major beneficiaries.

So, ignore the noise. Despite the Brexit buffoonery, London is still one of the greatest cities in the world and is still hugely attractive to the world’s wealthy. That could change but as the investment guru Sir John Templeton once said: “The four most dangerous word’s in investing are ‘It’s different this time’”.

So, if you are interested in acquiring a property in London and want to find the best opportunities while avoiding the seven most expensive mistakes buyers make, you can request a complimentary copy of my book, The Insider’s Guide to Acquiring Luxury Property in London.

The book reveals the strategies and techniques I have been using for over 18 years to acquire for our members (who are some of the world’s most successful families and business people) their ideal homes and investment properties for prices they didn’t think possible.

To request your free copy, simply email or call 02034578855 (+442034578855 from outside the UK) and quote School Notices.

Of course, if you know everything there is to know about buying in London then the book is not for you. But if you are planning to buy, for example, a £1m property, then you only need to discover just one tactic that shows you how to negotiate a mere 1% more off the purchase price, to make the book worth £10,000 to you. So, whether you are planning to buy a home, investment, a property for your children or a pied-a-terre, would it be a bad idea to request a copy of the book first?

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