• Simon Deen

Market Update - September 2021

The months are zooming by. This is my ninth market update of the year.


So rather than talk again about London or the wider UK market, I thought it might be interesting to take a step back and have a look at how global trends are effecting residential property around the world.


But before we get into that, something a little different, and topical too, given the queues of cars winding out of petrol station forecourts around the country.


Have you ever wondered how the sales of supercars compares to the sale of prime residential London real estate? No, me neither. Thankfully my friends at Savills have done the research, and produced a graph too.


And I hope that if you’ve learnt anything at all from reading my blog over the past 12 months, it’s that I love a graph.

As the impact of the first lockdown in Q2 2020 was felt around the world, both the sale of supercars and luxury property in the UK took a huge dent, with numbers well below their historic levels. But it’s the recovery of both markets which is interesting.


Despite economic uncertainty, the number of £1m+ transactions in prime central London (PCL) in Q1 2021 was well above the 2019 number. In contrast the level of supercars being purchased has yet to return to the same levels.


Whilst this is somewhat anecdotal, could it be that the focus of spending amongst the UHNW community is changing? Whilst we can’t compare supercars to property elsewhere, we can look at the residential markets in other parts of the globe.


Down Under


Housing markets around the world have been remarkably resilient to the economic turmoil caused by the pandemic. 2020 saw average property prices rise by 14% in Seattle, 11% in Berlin and 9% in Reykjavik.


However nowhere was the trend more pronounced than in New Zealand, with Wellington recording a 22% rise in property values with Auckland at 19%.


New Zealand’s population density stands at 19 people per kilometer, compared to the UK’s 278. It’s also incredibly beautiful, has an actual leader running the country, and a pretty robust approach to Covid too. It’s no wonder people are choosing to buy homes there.


Whilst this is the most pronounced change, it’s by no means limited to New Zealand. A once in a lifetime re-assessment of home, but also a recognition of changing patterns of work has meant that of the 15 cities analysed by Savills in the first half of 2021, 80% saw transactions above 2019 volumes.


Off for the weekend


According to data from Knight Frank, second home purchases outside of London increased by 83% in the first eight months of 2021 compared to the five-year average.


It is not just a UK phenomenon. According to Knight Frank’s Global Buyers Survey 2021, 33% of international buyers are more likely to buy a second home as a result of Covid-19.


In the US, according to the National Association of Realtors, second home sales were up more than 44% year over year in 2020. An estimated 45% of vacation home buyers are in their 50’s and 60’s, and buy for personal use.


Long-termism


In the ever changing investment world of crypto currencies and NFT’s, property is an asset class that everyone understands. We live in them, work in them and socialise in them.

However, as I discussed last week, we’re increasingly shopping online and more people than ever are working from home, at least part of the time.


It hasn’t taken long for this shift in behaviour to filter through to global investment patterns.

Over the first six months of 2021, $136 billion was invested in multifamily residential property (apartment buildings), a rise of 35% compared to the same period in 2020, and 4.1% higher than investment in offices.


In fact, investment in this type of residential property now makes up 28% of the global property investment market. For the first time since 2007, it overtook investment in office buildings.


Income + security


Real estate is the world’s most significant store of wealth. It is more valuable than all global equities and debt securities combined, and almost four times that of global GDP.


However, despite being the largest asset class, it was by no means the best performing in 2020. Gold, equities and securitised debt all delivered better returns.


But none of these are income generating assets. And in a low interest environment, the combination of income and long term security are very attractive.


 


Things I’ve been inspired by this week


‘Tell me. How can I be a learner?”
My mind went absolutely blank, and I heard myself saying, “It’s simple. To be a learner, you’ve got to be willing to be a fool.”

From Mastery, by George Leonard. You can read a small excerpt from the book here.





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