Stock markets across the globe are crashing.
As I write the S&P is down…, the FTSE is down…, the Dax is down….
Weak figures in China have sent jitters through the market and the Chinese markets have been shut twice to try to prevent panic selling.
“Dow has worst start to the year since 1928” scream the headlines and life is about to get harder; QE has stopped, companies’ earnings are weak and interest rates are rising. This is the perfect storm that many have been anticipating.
The experts in the mainstream papers are predicting that prime central London property prices will suffer because:
1. Higher interest rates will make mortgages less affordable
2. Prices have risen 61% in Prime Central London since 2010 – all the price
gains have been had
3. Demand from Asia is likely to evaporate
4. Property prices follow the stock markets
WHICH IS POSITIVE NEWS
Because the mainstream is wrong; this creates an opportunity for those with superior information.
You are probably aware of the curse of magazine headlines. BusinessWeek Magazine’s famous cover announcing “The Death of Equities” in 1979 is probably the most famous – the Dow Industrial Average was at 800 and equities took off for the following 20 years. Conversely, the hubris shown in 2007 when it was declared that we had a “Goldilocks Economy” was equally wrong.
As history has proven relying on the press for information is a huge mistake because it is merely reporting what the “clever money” has already done (I will show you press commentary to highlight this later). But the good news for those who understand the London property market is that in years to come 2016 will be regarded as a fantastic year to have bought property in London and the UK.
The uninformed will laugh at this suggestion but then the masses always panic when they should be looking for opportunities.
Inaccurate Thinking and Popular Myths About The London Property Market
Humans often act like herd animals and this is especially true when people think there is a lot of easy money to be made or lost. JK Galbraith’s “Extraordinary Popular Delusions and the Madness of Crowds” is an excellent book on various investment disasters and the mentality behind them.
Most mistakes are made by people who are wildly speculating and simply following the crowd rather than looking at the fundamentals. Inaccurate thinking in other words. The same is true today just as it was hundreds of years ago – think the Dotcom Bubble in the 1990’s and the South Sea Bubble in the 1700’s, for example. The investment may change but the psychology doesn’t.
Inaccurate thinking is often fuelled by myths. Here are some of the myths surrounding prime London property prices:
1. London House Prices Move in Tandem with the Stock Markets
On the face of it, this sounds sensible. The wealthy have a much higher exposure to equities and indeed bankers and financiers make up a significant percentage of buyers. Of course, if you are staring at a Bloomberg screen all day watching billions being wiped off investments and then reading the subsequent headlines, it is unsurprising that this is extrapolated to the London property market.
But to do so is completely wrong; See the charts below:
The FTSE 100
History proves that the two only correlate when a stock market crash is caused by a land price crash, which in turn causes banks to fail and credit to evaporate. 2008 was a classic example of this. Because the banks lend so heavily against land and property, a land price crash can be fatal for banks, which is why such crashes are so painful for everyone; credit, the lifeblood of modern economies, is frozen and destroyed.
2. The House Price to Earnings Ratio
This is a favourite of economists and city analysts. The average house price to earnings ratio is roughly 5. However, when the ratio goes above 10 a crash is imminent. A note from UBS in October 2015 made this exact point as the ratio is now just above 10.
And they are right – the property market has crashed when the ratio has risen above ten. But curiously what they fail to mention is that there have been far more occasions when the ratio has been above ten and the market has continued to rise dramatically. For example, in 2002 the Daily Telegraph reported:
“The top of the property market has been in trouble for some time… Property in some outer London boroughs now changes hands at phenomenal multiples of average local earnings - the prices being pushed up by a relatively small number of people driven out of expensive parts of the city. In Bromley, for example, house prices are now 10.4 times local earnings”
Yet the market soared between 2002 and 2007 so clearly this indicator is not very reliable.
3. Overseas’ and especially Asian investors have driven the London property market since 2008
Again this seems to be true. You have probably heard the stories of streets having no lights in any windows at night because the owners all live abroad (these stories are hugely exaggerated as you can imagine).
And on most streets you will hear multiple languages being spoken.
But London has always been a cosmopolitan city and research by Savills shows that international investors only make up c. 10% of the London market. It only seems much higher because roughly 70% of properties in new developments are bought by international investors, many of whom are speculators hoping for a quick profit.
The dynamic in the traditional prime central London market is completely different.
New builds are far more speculative – hence my report The Properties To Avoid Buying in 2015 & 2016 which you received in January last year (if you would like another copy please call 0800 389 4280 or email email@example.com).
How did I predict an Asian crash this year?
One of the many reasons I suggested that buying in new build developments would be a bad idea in 2015 and 2016 – especially the likes of Battersea Power Station which is being built by a Malaysian consortium – is because I predicted a crash in the Asian markets. This was based on a number of factors.
Using historical information and making calculations I was able to pinpoint that a crash was highly probable to take place in 2015/2016 (there are never any guarantees and anyone who says they can 100% accurately predict the future should be avoided).
And because the new build market is so reliant on international investors, especially from Asia, it seemed clear to me that this was a highly dangerous period.
In fact what we are seeing now is extremely similar to the situation in 1998. As Mark Twain once observed: “History does not repeat itself, but it does rhyme”.
As you probably remember the Asian Tiger economies suffered a massive crash. This affected global stock markets and fuelled fear of a massive recession as everyone was still scarred by the crashes of 1990 in the US, UK, and Europe.
In addition Russia defaulted on its bonds in 1998 which caused the collapse of Long Term Credit Management. This highly leveraged fund run by Nobel Prize winners was on the brink of bringing the world’s financial markets to the brink of collapse.
But the world kept spinning and the effect on London property prices was negligible. In fact, despite the fact that everyone thought the financial world would collapse in on itself (and then again in 2000 during the Dotcom bust) 1998 proved to be an extremely good time to buy property in London and the UK.
This is why listening to the press and economists is hazardous to your wealth:
It is always instructive to look at history for guidance on this. Here are some of the comments on the property market from 2000 to 2005
• 2000 – “Housing-market experts, from estate agents on the ground to analysts in the high-rise city banks, are agreed on one thing: this is more than the annual summer slowdown. House price inflation has dropped considerably and, in some pockets of the capital - usually areas on the fringes of more fashionable addresses - where people were paying silly prices for bad houses, properties are indeed worth up to 10 to 15 per cent less than they were six months ago.” The Daily Telegraph
• 2001 – “The house price indices are for once agreed: prices are slipping as the effects of recession take hold. Suddenly, the telephone-number price-tags of rather ordinary two-bedroom flats are beginning to look ridiculous.” The Daily Telegraph
• 2003 – “He [Roger Bootle, former Chief Economist at HSBC and one of the Bank of England’s “wise men”] said: ‘The message is clear. Houses are now so over-valued that a prolonged period of falling prices is on the cards.’ … Some London ‘hot spots’ have already seen prices marked down in recent weeks, which has been attributed to lower City bonuses and Stock Market uncertainties.” The Daily Mail 1st March 2003
• 2005 – “After five years of unstoppable price rises, the housing market has been showing signs of jitters.” BBC
Prices peaked in 2007.
All of which proves that if you rely on what you read in the press then you will almost certainly be making a poor decision because you will be part of the herd.
Unfortunately, in 2006 the masses were suckered in to the market when the consensus changed and everyone decided that there was a new paradigm: this time property prices really did only go up!Of course, you know there is trouble ahead when the herd rushes into property.
You can probably remember some of the idiotically bullish headlines in 2007. We all know what happened next and the Queen’s poignant question to economists in 2008 when she visited the London School of Economics: “Why did no-one see this coming?”
They got it wrong all the way up and then, perversely, changed their tune just as the market was about to crash…
But prime central London recovered quickly, so Is the London property market bullet-proof?
Absolutely not. You must be wary of the optimists because they too get it completely wrong. Just as the pessimists tend to be economists and city analysts, the optimists tend to be estate agents and developers who have a vested interest in talking up the market because they are legally obliged to sell their clients’ properties for the highest price possible.
And their main argument is that prices must go up as demand is greater than supply. This seem to be a strong point especially as in 2007 it was estimated that 250,000 homes per annum need to be built in the UK to meet demand. We are nowhere near meeting that target.
However, the supply/demand argument is misleading: demand outstripped supply in 2007 and we all know what happened next. The market crashed but not because hundreds of thousands of homes were suddenly built to create an oversupply.
Quite simply the classic economic theory of supply and demand isn’t actually very helpful and is a poor tool for judging price movements just as the house price to earnings ratio is also misleading.
So is it 1998 or 2008? Is now an opportunity or is it a time to sit back and observe?
As I have mentioned I use indicators that have been proven over numerous cycles to judge when there will be dramatic falls, but that is information that is reserved for our members.
Nevertheless, I believe that in ten years’ time people will look back on 2016 in the same way they do now on 1998 - as a great year to have bought property. However, it is not just a case of jumping into the market and simply thinking that buying any property will suffice.
Most of the properties currently available are not particularly good and some are vastly overpriced. Nevertheless, there are almost always good opportunities available, you just need to undertake the necessary due diligence to find them. If you don’t then you only have yourself to blame.
Amazingly, research by The Daily Telegraph discovered that the average buyer only spends ninety-six minutes viewing properties before they buy. This is forty-three minutes less than people typically spend deciding on where to go on holiday or which computer to buy. This is madness and they understandably end up buying poor or average properties at inflated prices.
Admittedly, for some people time is the biggest enemy. In fact, if you are highly successful, you probably do not have enough hours in the day. Therefore trying to find time to speak to all the agents necessary (there are over 250 in prime central London) and inspect dozens of homes is nearly impossible.
But, it is essential to make time to carry out the necessary due diligence and have a good team of experts to help and advise you. In short, you need to treat the acquisition of a property as you would a business transaction, irrespective of whether you are buying a home or investment.
This is the interesting thing about the developers’ roadshows and buying homes in general: people who normally behave intelligently do the strangest things. If you were buying a company would you use a solicitor recommended by the firm you were buying? Yet many people use solicitors introduced by the developers.
Indeed, if you were planning to buy a firm would you walk round it for just 20 minutes, admire the slick presentations and agree to buy after a swift negotiation? Or would you spend a considerable amount of time on the due diligence and ignore the glitzy presentations?
Of course all this takes time and even if you had it, you would soon become aware that acquiring a property in London is not your field of expertise.
Not only would you realise that you are only seeing a small percentage of the properties available and failing to find the best opportunities. You would also be aware that the information you are receiving on prices is incomplete or provided by the estate agents who are legally obliged to achieve the highest price possible. And as we all know, statistics can be manipulated to give whatever impression a salesperson wants…
Therefore deciding what represents a good opportunity and an astute acquisition is far from simple.
Quite simply the market is hugely biased against you.
So how can you easily acquire your ideal home or investment on the best terms possible to grow your wealth and protect your family’s ongoing financial security?
Creating and then keeping wealth are two distinctly separate skills. You have probably already noticed that families like the Rothschilds, the Du Ponts, the Ortegas and the Kwoks use property as one of the key foundation stones of their legacy protection and wealth strategies.
But how do these families ensure they are making astute acquisitions? What are the pitfalls they avoid? How do they find the best properties with relatively little effort almost as if the properties are brought to them on a silver platter?
To discover their secret, you may want to join the select group of families and individuals who have become members of Mercury Homesearch.
Please note that membership is not suitable if:
1. You hope to buy at the bottom of the market and sell at the top - I simply cannot promise this and if you manage either it will be through luck. As Baron Rothschild famously said: “I will tell you my secret if you wish. It is this: I never buy at the bottom and I always sell too soon.” I can find you the best properties and show you how the property cycle works. This is a cycle that has been proven for over 400 years and gives you a much higher probability of knowing when a major turn is about to happen.
2. You are looking for a get rich quick scheme – when done properly, acquiring a home or investment in prime central London will be extremely lucrative. However, if you are expecting some spurious system which “guarantees” returns of 20-30% per annum this is not for you.
3. You only want to be told what you want to hear – one of the most important things I do is to tell people the uncomfortable truths. It may be that what they want to buy is unrealistic for the area or their budget. It may be that their investment criteria are misguided or calculations are wrong. If you are not willing to receive advice, then please do not apply.
However, if you are serious about acquiring a home or investment in London and want to have an advantage over the estate agents rather than being at their mercy, then the first step to becoming a member is to apply for a Bespoke Property Acquisition Blueprint.
The Blueprint starts with a one hour consultation. I will thoroughly review your property requirements and give you the tools you will need to make a successful acquisition.
I will reveal closely guarded information about what is developing in the prime London market and the signs you need to look out for in case a crash is imminent. This is information you simply will not read in the press or hear from estate agents and is essential if you want to buy an exceptional home or investment.
Who do you think will succeed in buying the best homes and investment opportunities? The person who treats purchasing a property like an amateur hoping to get lucky. Or you, the person who is fully aware of the macro and micro factors that affect the market.
Will the less-informed, who rely on websites and estate agents prosper or will you, the person with access to up to the minute information and off-market properties?
This is what the Bespoke Property Acquisition Blueprint will give you. I will show you how to prosper in this most competitive of markets and answer all your questions.
Your Bespoke Property Acquisition Blueprint Will Include:
1. A diagnostic analysis of your target market – what has happened over the last 24 months and what do we expect in the next 1, 5 and 10 year period. I will advise whether now is a wise time for you to make an acquisition or whether you should wait and for how long.
2. A hotlist of agents who typically have the best properties in your price range and target area. This is a comprehensive list that none of your competitors, i.e. other buyers, will have.
3. How to become a preferred buyer. One of the unspoken secrets of the London property market is the preferred buyer system. People with preferred buyer status will see the best properties ahead of you, meaning you often won’t even be aware of the finest homes and investments available. I will show you how the preferred buyer system works and how to have immediate access to it.
4. A diagnostic analysis of your requirements – We will use our True Valuation Matrix to analyse your requirements. During our meeting we will discuss theresults including:
- Preferred Areas
- Street and Building targeting plan
- Micro areas to avoid
- A review of price movements over the last 24 months and our “in house” calculations for the next 24 months
- Sales’ analysis of your preferred area
- The last three years sales statistics in your chosen area
5. Investors’ Profile– discover which areas will offer the most growth, when to buy, the type of property to buy and the best financing
6. Advice on negotiation strategies – discover how I negotiate significant price reductions to achieve terms that my clients thought would be impossible. I will share with you my most successful negotiation techniques and how they can be applied to your property purchase.
7. Your questions answered - I have been sourcing & acquiring prestigious London properties for 14 years and have bought hundreds of millions of pounds worth of property. I have also personally inspected over 20,000 properties and studied the details of over 150,000 houses, apartments and investment opportunities.
Bring any questions that you have for me to our meeting and I will ensure that they are answered. As your trusted advisor for your purchase, you have access to my expertise and experience to save you time, find your property and complete the purchase fast - and negotiate the very best price.
8. Your Buying Team – You will be given access to our team of proven experts who can help with everything: finance, tax, surveys (including structural, electrical, gas, drain, etc.), conveyancing, lease valuations, school applications, removals, interior design, security, etc. Avoid the bureaucracy and confusion by having a team of specialists represent you.
9. The Viewing Checklist – this simple list will show you what to look out for and the questions to ask when inspecting a property. Information is essential in any negotiation and this is the foundation.
10. The conveyancing checklist – Agreeing terms is not the end of the negotiation. It is essential that the “conveyancing” process is handled correctly otherwise you could lose out to another buyer (nothing is legally binding until you exchange contracts). Your solicitor will help but this checklist tells you everything you need to consider once you have agreed terms on a property.
11. Sourcing off-market properties – One of the effective strategies we use is to approach owners directly. You will receive a copy of the letter we use that has been proven to work. You will also be advised of the follow up process required to increase the probability of success
12. I will explain how you can work with me to source, negotiate and complete the purchase of your property – and why the time and cost savings I create for my clients, makes working with me effectively Free.
At the end of our Consulting session, you will have your personal blueprint which will help save you tens of thousands of pounds if you choose to continue with the purchase on your own. If you choose to work with me on the rest of your purchase, the fee of £2500+VAT (£3000) is applied against future fees making your consulting session Free.
The Mercury Blueprint Guarantee
Unfortunately we live in an age of hype where everything is the greatest, the best, etc., etc. But it amazes me how few firms are willing to guarantee their services and products if they are that good.
I am so confident in the value of the advice you will receive, that you will be covered by the Mercury Guarantee:
“If you are not entirely satisfied with your Bespoke Property Acquisition Blueprint, then you decide the fee based on the value you feel you have received”.
To reserve your Bespoke Property Acquisition Blueprint, simply email firstname.lastname@example.org or call 0800 389 4280 (or +44 800 389 4280 from outside the UK).
We will then arrange a convenient time for our meeting
I look forward to hearing from you.
p.s. The Bespoke Property Acquisition Blueprint can also be conducted by telephone if necessary. To reserve your bespoke Blueprint, simply email email@example.com or call 0800 389 4280 (or +44 800 389 4280 from outside the UK).
p.p.s. What I reveal in the blueprint is not mere theory. These are the strategies and tactics I have successfully used to acquire hundreds of millions of pounds worth of property for me and my members. I have been acquiring properties in prime central London for over 14 years and I have advised some of the world’s wealthiest families, most successful business people and entrepreneurs
Consequently I have also appeared on Bloomberg TV, Reuters and CNBC and my opinion has been sought by The Financial Times, BusinessWeek, MoneyWeek, The Times, Forbes and many more besides. I tell you this not to brag, but to assure you that the information and advice you will receive is of the highest standard and from a reliable source