London Property Market Update 2023: Top Agents Share Year-End Predictions - Andrew Langton

As we approach the end of the year, we've curated four exclusive episodes featuring top agents with decades of industry experience. In these episodes, we delve into the state of the property market in London, seeking updates and predictions from these seasoned professionals.

If you have a property question, we would love to hear from you email us at ask@londonproperty.co.uk or book a free 15 minute call by texting 07860 343434.

In today's episode, we're honored to host Andrew Langton, a veteran with over five decades of experience in the industry. Andrew shares his unique insights into the current state of the London property market.

As we reflect on the challenging market conditions of 2023, Andrew notes a near standstill in residential property transactions. Factors such as rising interest rates and geopolitical turmoil have contributed to a cautious approach among buyers. The rental market, however, remains lively, driven by the necessity of finding a home.

Andrew sheds light on the changing dynamics, emphasizing the impact of financial considerations and buyer sentiment. The increased cost of debt, coupled with a desire for value for money, has led to a slowdown in the sales market.

Delving into the future, Andrew discusses potential shifts in buyer behavior. The concept of working remotely has altered the traditional patterns of living and working, with the countryside becoming an attractive option due to improved online work capabilities and the desire for a higher quality of life.

In addressing investment opportunities, Andrew explores the appeal of London's residential property for global investors, particularly those from regions with surplus funds generated from commodities like oil and gas. He also highlights the significance of political stability and safe investments in attracting international capital.

Stay tuned for our engaging conversations with the next agents as they share their perspectives, expertise, and predictions for the future of London's real estate.

Our Market Update series is designed to provide you with a comprehensive understanding of how different prime areas within London are navigating the ever-changing real estate landscape. Whether you're a buyer, seller, or investor, these episodes offer invaluable insights that can guide your decisions in the London property market.

Maximize your property wealth with London Property. Turn challenges into opportunities. With expert knowledge and reach, we tackle the complexities and inefficiencies of the property market with you.

Transcript

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.

Hello, and welcome to London property, the home of super prime, I am your host Farnaz Fazaipour. And today we're delighted to welcome Andrew Langton, founder of Aylesford to our show. For those in the industry, he needs no introduction. Welcome to the show.

Thank you very much. For those who may not know, Andrew Langton, Andrew, please tell us a little bit about your career so far.

I started my career by starting a company called Aylesford in 1966. So it's long before there was rarely a property market, you bought a home to live in, you didn't buy a home to make any profit out of and that continued right through till today, I'm still trying to do the same thing I was doing 5560 years ago, and enjoying every minute of it.

So we would really like to hear your perspective we're having not a very good market or a very complex market at the moment. So from your experience, in your opinion, what would you say is going on at the moment in the market?

Well, it's ironic, we're here in the 12th month of 2023. The markets started to slide for want of a better term, in the beginning of the January to March the first quarter, and has continued in that pattern with the the hike in certain different interest rates. And now we are at the end of the year. And that hasn't the the turmoil in the in the Middle East has actually arrived at a similar moment. So the actual market in London is, in my opinion at a near standstill. In terms of people buying residential property, there hasn't been any pattern to to say that any particular area of the market is is functioning, the rental market has been obviously, the liveliness of all because people have had to buy had to rent somewhere or had to find a home. But the sales have been very, very far. And few between few and far between. And that's at every sector, that the wasn't a pattern of migration of people leaving London in 2021 22. And selling up and moving to the out of London, but that's largely the domestic market. But the international market has been extremely quiet have been some isolated transactions. But what has been well documented as the absence of money coming in from Russia and the China, there have been a few transactions from India. But mainly it's been driven by American buying more than anything else. But it's it's there's not enough of a pattern to say that we've got a flow of interest coming from any particular area.

And would you say that that's mainly financially related kind of sent? Or do you think is sentiment because I always find that when when when things happen. We have to kind of sit here and wait for people sentiment to catch up before they go back into action. What do you think

it's a natural instinct of anybody when they see what's happened here with the rise in interest rates on a monthly basis to say hold on do nothing. The reason for which is the cost that will incur a bit of debt at the moment is that is the main problem. So you've borrowed money, and you've now had a much higher interest rate than you had 12 months ago. So, so clearly now you've got to clear that debt. And if you don't do that debt, you're going to start running out of money, the buyer is saying, I'm going to wait until that has gone up, because I think the, the pattern of increasing of these interest rates has been so brutal that you've felt that it's going to continue to where we were in the 80s. When interest and even further back in the 70s, when interest rates found their way up to a sort of 17 18%. But I think that is not going to happen for one minute. But I do think that the buyer develops a sort of hyena instinct about whether or not to purchase here, whilst this is going on. And of course, people want to get value for money, whether you're buying a house, you're buying petrol, or you're buying food, you want to try and get it at the best possible price. And at the moment, I think that has been one of the main reasons why the market has slowed down.

I mean, a lot of people will, will wait for the market to sort of bottom out before stepping in. So would you say that we've lost the opportunistic purchases? And we're more focused on the ones who buy for necessity? Or do you think the opportunistic purchases have moved to different investment model?

I think it's driven entirely by people having to live here, either for work or whatever, you know, reasons which are normal, I think, where you have the abnormal, meaning people moving away from an area which is hostile or where you've got civil unrest, that's an emotional reason, I think that's where the rental market has benefited by people say, I'm going to go in and find Sarah to live in London. And maybe they have the very good reason to move quickly because of schooling and education. But by and large, I think people are just sitting on their wallets waiting for this market to ease off but where you've got the turmoil that we have, at the moment in the Middle East, I think that's added a new dimension to people's decision, or decision making, because they're saying, Hold on, maybe we shouldn't do anything, but stay where we are for the time being. But I didn't know, you know, if you lived in summer, as close to what's going, you know, so badly wrong in the Middle East, you would want to save we can't survive here. You know, if you lived in Israel, or if you lived in, in anywhere in Palestine, if you had the ability to leave, you would look upon that as a daily option to say, Where are we going to go. And if you wrote a list of the six places in the world you want to go to and if you could get into those places, I think the UK would be quite high on that list. We

started having tax changes the sort of 2013. And a lot of these tax changes, were targeting the overseas investment into London, which was making London in my opinion, unaffordable for the locals. And I think some of these tax changes that the government introduced was purposefully to correct. And it feels like we've had a really dead market for about 10 years has been kind of flat. And to me, it sort of feels like when I first got on the property ladder, I all I needed to do was put down 10% And you know, get a really affordable mortgage. So do you think that the mortgage products and the market are kind of coming to this adjustment where we're gonna go back to making things affordable, because before it felt like prices were going up, and it was unrealistic? It was more like, Well, I'm a non Dom, if I pay 4000 or 5000 square foot, I don't care. And it was just like a really false economy. So would you say that this correction is going to put us now somewhere where the markets gonna go back to the locals actually being able to get onto the property ladder and having a more normal market?

I don't think we'll see normality that you and I remember, again, when the Conservatives took over, I think 11 years ago, stamp duty was 4% under Gordon Brown stamp duty now as the highest in the world, alongside Vancouver, and Hong Kong. There's even talk that that's going to increase on top of that. We're more regulated now than we've ever been. So the ability to just move money from one country into the UK is not going to be anywhere. Likely It was when we all lived under different governments before. So this government have introduced measures that are making it more and more difficult. So the attractions of coming to this country are not what I remember. And I don't think that will ever change, I don't ever see tax being reduced, although it's being talked about and that you have these rumours of inheritance tax being reduced or extinguished altogether, which was a hideous tax, in my opinion, because you've probably paid tax half a dozen times before you've dropped down dead. But as the previous chancellor said, when I asked him, Are you ever going to reduce inheritance tax? He said, No. And I said, why not? Is it because you're dead? And therefore you're dead? And you don't argue? So it's a very easy tax to collect? Probably a clever answer at the time. But no, I think the taxation here is is very, is too high. But I don't think there's any anywhere else I prefer to live myself. But I think it's, it's, you know, there's just so many people, the population has got to such a level that they can feel entitled to bring it introduces taxes, because people will pay them.

I remember in my youth coming to talk to you about a portfolio that you'd sold in the 70s of 380 units, rental investments. And I came to see you because I thought there was an opportunity of somebody else to do similar thing. But the reason I'm talking to you about this is because I always feel that markets find a way. And people are always wanting to find a reason to put their money in the UK because it is safe. And you know, there's a lot to rely upon. So, you know, apart from the personal reasons that people buy residential property, you know, there's investment reasons that people always want to have their money here. And there's growth sectors that that we'll we'll dive into a little bit right now. But what I'm trying to get at is in prime central London, if we've had, they say something like 38% of the landlords are going to leave the market because of the way that personal buy to let investors are being taxed. And it's becoming unmanageable for a lot of people who not really doing it as a profession and the accidental landlords, which used to be quite a large percentage. So are you seeing a way that people could actually have big portfolios? Because, you know, the big portfolios are either the estates or the one or two that you know, the one that you acted for, and the one or two that might exist apart from that. But are you seeing any way that people might be able to come into prime central London to actually either amalgamate on mass or, or have a large portfolio of rental investments? Do you think that this is all going to move the kind of rental into the build to rent and the private rental sector outside?

People recall, back in the 70s, when the Middle East gradually got the money from the price of oil doubling from six to $12 a barrel, came over here. And I remember selling one particular Middle East and 415 Flats. There's one building in Grosvenor Square, he paid 8.5 million for 415 Flats. There's one block 100 yards from here. Now, a basement flat in Grosvenor Square would probably be 8.5 million out of the 450. And he bought, so the answer is by buying something, then it is, is done probably better than just any other investment you can imagine. It's not it's not free of tax like a moat, a Ferrari GT 22725 out has just sold for $52 million. But I think if you took the view, and I remember similar, you know, the Dorchester Hotel selling for 12 million, then selling for 37 million and I remember the owner of the Doctor Who paid such as seven min. And I said I think you're you know you're insane for buying such a high price. He said to me, you never pay too much for quality you sometimes pay too soon and sold it exactly double 30 months later. So the the answer is if you wanted if you had a lot of money If you're a sovereign fund investor, and every Monday morning, someone blocks a billion dollars on your desk and say you've got to invest it, what do you do with it? And where do you put it? And how safe is it? You can imagine a Norwegian sovereign fund oil, Abu Dhabi sovereign fund or any sovereign fund, what do you do with money. And I think London property, London residential property is is a target. What will happen is that there could be legislation around the corner as there is going through at the moment where that tenant has some further benefits over the landlord, you've seen the repeal of the detail reform bill just recently. And I think you've got to watch out for something like that. So you've got to try and find something that isn't going to be a target for further taxation. Maybe the hotel market is still a much sought after the new buyer brand, you have an immediate investment, you will have an immediate return. And so that's when you get the situations like someone's paying 5 million a key for the Ritz Hotel. Because what else do they want to do? And you know, who bought that? And I think they have the option to go and buy whatever they can in other countries, but somehow, the UK or certainly London is one of the top choices.

You do see, these new models are, you know, the sort of CO living and the senior living and these kinds of things are attracting and they're actually growth sectors. So you moving away from the really competitive and now difficult to be profitable in general development work where you go into this sort of lifestyle. And, you know, where do you see money coming from, from, from what I've heard these see money coming from countries where they have this extraordinary tap of whatever it may be gas or oil, which is the most sought after requirement and everybody until they find an alternative, it will continue. And therefore that gives them a disproportionate advantage over anybody else with by having that surplus money. And as long as we go on consuming, that commodity, that that small number of people will benefit. And what do they, as I said earlier, what do you do with that money? And where is it safe? And I think, from our perspective, and living in the UK, one of the safe things to do is buy farmland, and you'll get that tax benefit. So I see that happening at the moment. But we've got to watch out if everybody suddenly pours into that, the chancellor is going to say, I'm going to have to have another look at that, because we're giving away money that we need to otherwise tax to look after things like the National Health. And so I think you've got to try and find somewhere that safe as a look as an area of the world politically safe, where you're not going to be subject to an over night tax, don't forget, we've we're going to have a change of government possibly in the next six to nine months. And all of these things are being well and out at the moment as to what could happen. And I think you'll find some of those things that we've enjoyed are going to be more difficult to, to hold on to because someone's going to introduce another tax to share that amongst others. You will see situations where other I mean, I think you've got to go and look at other countries and see what they've done with with money and how it's been eat more shared equally like say, Scandinavia or New Zealand or places like that, where you've got to make make sure that no one's suffering. So tax is going to be the sword of Damocles over anything you're doing. And if too many people are doing it, you'll find someone will tax it, whether it's alcohol or cigarettes or cars. They're all being taxed. I've looked at the moment we're all being towed by electric cars. We all go and buy electric cars. Bingo. That's where the tax will be on the electric car. Next, you'll see, So you're so used to what you're saying is, is this a pattern that you've you've obviously noticed in your career that when some kind of property investment becomes your pillar, then it becomes a focus for the gun. women how to get money from it, which makes sense. So if you did have a crystal ball, that would be your advice to our listeners going forward from here.

What if that is the plan would be to buy a home? I think my possibly because of my age, I'm more inclined to live out of the town that I would do in the town, I think the the education is better out of the term. Because of the amenity of sports and fresh air. I think the home in the country is going to be cheaper than the home in the town, understandably. And I think we've now developed this new culture of working online, we work from home, we work on on Zoom, we work by an internet, we don't have to be anywhere, and fuel to go from the country into the town to work is not ready going to be agreeable to people, I think I've got staff myself where the care worker looking after the children is earning just about the same as the person who's employing them. The travel is too costly, you know, whether it's been in a car or you know, by rail, it's incredibly expensive, you'll catch a catch a train, 66 pounds returned from where I live to London. And that's before you get on a tube and then you get on a bus, then you get on or a taxi or something like that same time you bring your car into the town, now you've got to tax, the Ulez tax, as you come in, through, if you've got a car that doesn't qualify, you then come into London, you've got more taxes coming there. And that's not going to stop that's going to go on and on and on. So I think the whole culture of work is going to change. And therefore the answer really would be I think the country home will probably do better than the Townhome.

And there'll be more demand for it. I couldn't agree more I wish I could live in the country or

the quality of life I think is better. Yeah. You know, the the, I think education is going to be so much such a big factor in people's decision making to live somewhere elsewhere. And of course, now since COVID. We've developed this culture of saying, we're going to work by zoom. I mean, you've got these new words COVID, zoom, Ulez. They weren't, they're not in the English dictionary. And in

going back just before we say thank you and goodbye to you, but going back to the subject of you know, people providing rental stock on mass, I wonder whether you know, going on with the culture of the biggest car company in the world doesn't own a single car, the biggest hotel service doesn't have a single property, you know, with Uber, Airbnb, etc. I wonder whether London will become a place where you couldn't sort of put together a portfolio of 120 units because you keep buying in the same streets. And you just have these big landlords that just provide you a rental lifestyle, and actually people live in much nicer houses in the country. I

can't see that happening. I think the days where you could accumulate a big portfolio, which the institutions did in the 60s and 70s are gone. You you've had the your right to purchase your leasehold reform bill is now it's everywhere. I remember sitting from lunch once. And a member of the royal family said I think it's appalling that people can buy their homes. You're living in a Victorian age, but even then I was inclined to wonder what would happen next? And of course, inevitably, it will it has happened. I think you could possibly accumulate a number of properties by mainly by developing them yourselves and then renting them. But as I said earlier, you're going to be very vulnerable to the politics of the day, saying I'm afraid you've got to you can't go on renting that without a major penalty, and making it really just not worthwhile.

Moving people outside to the

difficult, I think, you know, we've known about how vulnerable the residential market is to change the commercial market isn't. And I think that's where you might be able to do well, but then you've got to see how people are downsizing from offices. And so those endless offices look at look at Canary Wharf The amount of empty floors in the main building people aren't, they don't need them anymore. And so what do you do with those boom, they go back to residential?

Yeah. Which is what they're doing with Canary Wharf

and in America. Yeah. Well,

Andrew, thank you very much for giving us your time and it was very good to speak to you and we look forward to welcoming you back to the show again soon.

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