I know you’re incredibly busy so thank you for taking the time to get involved in this interview for my readers.
We first met when my wife and I decided to move to Woolwich Arsenal in Southeast London some 8 years ago now. Since then we have rented, bought, and sold a few properties from your real estate agent (London Stone Properties).
I thought of you recently as I have been looking at whether to get into the buy-to-let market or more passive investments like real estate investment trusts – I wrote about this in my buy-to-let or buy REITs post.
So, I thought it would be great to hear your thoughts on the London property market. Let’s jump straight into this with my first question.
1.Can you give us a little background information on you? For example, where you’re from and what got you into the real estate business.
Like most people today I have had several “careers” in my life. I went to university late and then moved up to London. I worked at KPMG before moving into Operations in an Investment Company in the city. I got into the property 20 years ago when I dabbled as an amateur landlord with a couple of flats.
I then got into estate agency by accident in 2004, the city was in a downturn, I was incredibly bored at work and unable to find another job.
So I set up a very small business finding tenants for landlords at Royal Arsenal Riverside. To my surprise, I enjoyed the work immensely, so little by little, we grew the business from there.
2. You have been established in Southeast London since 2004, what made you focus on this area? Any special bond to Southeast London or was it more a case of the opportunity was there?
We often start with what we know best. I was living in SE and had a couple of properties SE. Then I had a new flat coming on at Royal Arsenal Riverside at the time I was unchallenged at work. I found a tenant for that very quickly and then started the business.
I had the challenges of an area that people didn’t know and to start with wasn’t keen to live there but the advantage of having very little quality competition.
Over time the reputation and quality of the neighborhood has risen, as has the quality of our competition.
3. Your core business is focused on Woolwich Arsenal, a wonderful area that’s seen massive changes since my wife and I first moved there and left a few years ago for Malaysia. What have the challenges been with being the prominent real estate agent in Woolwich Arsenal?
The challenge at the start was getting people to rent or buy here. When I first started up 15 plus years ago I would go and meet people at the train station in order to walk them to the development. If not they stepped out of the station, looked around, and stepped back into the station and they never made the viewing. [LOL I bet! I remember the old days of Woolwich.]
The area has transformed itself in the past decade and that is a problem long since gone.
When Berkeley releases a new building, there is a small period of 2-3 months when there is too much stock on the market and that is hard for the owner who has just completed on their flat. It is common for their stress to come directly through to us. Once the initial oversupply falls away then it becomes a much smoother road for the investors.
It has been a challenge to price right and to bring sellers or investors along with you on that pricing. If you price too high, then the overall yield for the owner drops as the property stays empty too long. Of course, you don’t want to go the other way either.
Britain has a hidden problem as many of the big agents go in and overvalue properties, particularly for sale. The property will then sit on the market for far too long, and often when the price reduction comes it is too little too late. We have this problem with a big name competitor at the moment.
4. Are you a landlord yourself or do you focus on your company real estate business?
I am a landlord myself yes, what I have in London is in the South East, and also outside of the UK.
5. We have briefly discussed Brexit on a few occasions and the effect on the UK but notably on the London property prices. What effects are you seeing on the ground in Southeast London?
I am pretty sure that the effects we have seen are the same as the rest of London. (Prime has probably been hit harder than the rest of us.) Brexit really started affecting us on the back of the usual cyclical downturn.
London is a cyclical market.
After each sustained price rises, you get a flat market and then a downturn in pricing. That downturn never reaches as far as the last downturn. The market stabilizes at the new bottom before rising up again higher than the last high before prices settle and then drop a little and the cycle starts again. As each drop is less than the one before and each high is higher than the one before, prices have been rising now for the past 40-50 years (with small downturns within that.)
Having had a good bull run in prices through the first 6-7 years of this decade it wasn’t surprising that prices started to decline in 17/18 (18 for royal Arsenal). Brexit added onto this last year and continued into the Spring of 2019. Prices have now stabilized and any buyer is getting a much better deal today than they would have 12-18 months ago. We are pleased to see prices have stopped falling.
Of course, Brexit is still making people cautious so we don’t expect the market to fly away in the next few months. But clarity in October this year should lead to a gently rising market during the course of 2020, and the cycle begins again!
6. I know some investors I have spoken to believe it’s potentially a good buying opportunity at the moment in London. With the potential challenges of Brexit in the short-term do you believe it’s a good time to get into buy-to-let investments?
All Investment has risk.
The two main components of your return are:
- Locking in the right price to start with
- Knowing when to sell
The later is the harder of the two as most of us try and wait too long to potentially eek out more profit.
Of course, a no-deal Brexit is a concerning prospect for the housing market, but the rest of Brexit appears to be priced in given the recent price falls. Furthermore, the fall in the pound makes foreign money go further. As always you need to consider the type of property and location you buy-in. We are still fans of good-sized 1 beds and quality 2 beds. In Woolwich, we get the new Crossrail line in 1.5-2 years time. This will make a huge difference to rental prices, so your yield will jump as soon as its opening date becomes a certain fact.
We work with a lot of Berkeley Homes’ builds and the quality of their work stands the test of time. This is very important for an investor.
We also expect a reduction in supply on the rental market over the next few years (please see question 7- last paragraph). Any noticeable reduction in supply will have a corresponding increase in rental prices. The rental market works like a “perfect” mini economic world when there is an imbalance between supply and demand prices that are affected by a matter of weeks.
7. How do you see your business changing in the next 12-24 months?
We expect the requirement on Letting Agents to become greater and the need to get all the paperwork and regulations right will grow. As some agents continue to be complacent about the need for this, landlords are going to suffer.
The Tenant Fee Ban was introduced on 1st June, the Right to Rent Act, GDPR, and the Proscribed Information Act was introduced in the last few years to name but few. We expect further regulation to arrive and we may well see regulation of estate agents. Regulating agents would be no bad thing. Too many do a bad job and the landlord pays for it.
We think it will be harder and harder for landlords to go it alone. Not following the regulations allows bad tenants to prevent the landlord from getting the property back or recovering missing rent when they fail to pay.
We expect to see continued consolidation in the industry as smaller agents find the stricter regime harder to work with and look to sell on.
We think the sales market will slowly improve throughout 2020, the UK buyers will be mostly owner-occupiers who tend to be more solid buyers. We expect the investors to principally come from overseas, especially given the relative weakness of the pound.
Over the next 1-3 years, we expect the volume of rental stock to drop in the capital. The UK and oversea landlords have been profit-taking and selling up, the harder tax regime has discouraged UK investors from adding to their portfolios and of course, the uncertainty around Brexit has slowed the market.
The rental market is very much driven by supply and demand. Thus as the reduction in supply trickles through the market we expect to see rents rise.
8. On a personal level, you’re one of the busiest people I know! How do you relax and recharge?
I do a lot of things outside of work. I travel to watch sporting events, I visit different cities and play a fair amount of sport. I go to exhibitions and events. And I read 1-2 books each week.
9. Lastly, when are you planning to come out to South-east Asia to visit us?
Hmm, I know I must get there. I’m hoping to go to Japan for the Olympics next year, depending on business there may be an opportunity to tag a visit at the end of that trip.