Brexit And A Collapse in Wealth

The press loves a scare story.

As I have mentioned in past articles, there is a proven bias towards negativity and bad news is given far more weight than good news.

This is not to belittle the implications of Brexit. But just to point out that the world will continue spinning and the human race will continue to do things both good and bad. Indeed the one thing you can rely on is that we will create new and wonderful ways to make and lose money.

Indeed, the speed of technological change has never been greater and this will create amazing opportunities.

However, what is most important in terms of London property is that the world is becoming a richer place. New World Wealth recently reported:

“The Global UHNW population will have increased by 43% by 2026 to 275,740.” The increase is not even: ‘This “multi-speed” trend is set to continue over the next decade, with the number of UHNWIs predicted to climb by an average of 12% in Europe, compared with a forecast 91% growth in Asia over the same period.

In Europe, the UK will remain the front-runner in terms of UHNWI numbers in 2026, with a forecast population of 12,310, up 30% from today, despite high levels of economic and political uncertainty as the country negotiates its exit from the EU.

By contrast, New World Wealth forecasts little growth in the ultra-wealthy populations of Germany, France, Italy and Spain. “Here, growth will be constrained by growing religious tensions, a combination of rising taxes and higher state pension obligations and public healthcare costs, and the loss of high-skilled jobs to Asia,” says Mr Amoils. “We also expect to see some outward migration of HNWIs from these countries.”

Now, this is only a forecast and you may not agree with what he says about Europe and the UK. But the simple fact is that there is an explosion of wealth in Asia and this will continue. In very crude terms, they are enjoying their equivalent of the Industrial Revolution. Fortunately for those of us who are British, they will not use their power to invade us. Not in a military sense anyway.

However, there will be an invasion and it will be financial. This is already plain to see as it has been happening for decades. Just look at who owns the UK’s utility companies, airports and other key infrastructure.

And this is the essential thing to understand about Brexit: it is a political issue and not a credit issue. This doesn’t mean that there won’t be any repercussions and the financial centre could be seriously affected. But even if you believe the rather hysterical predictions of a mass exodus by the banks (which they themselves are denying), this does not mean that London will be less attractive for international buyers.

Firstly, the majority of international buyers aren’t buying because they need easy access to Goldman Sachs, JP Morgan, etc. They buy in London because it is safe, they have clear property rights and we have a stable political regime. Indeed, compared to much of the rest of the world we are a safe haven and Brexit will do nothing to change that. In fact, it makes us an even safer option in many people’s view (including many Europeans to whom I speak).

But another major reason why London is so attractive is education, a point made by one of our members who is an expat living in Singapore. He emailed me to say:

“Thousands if not millions of students will target UK universities in the next decade and their parents will continue to buy property for their student years. The wall of Asian middle class aspiring students coming to the global workforce in the next 2 decades cannot be really comprehended by any of us… Google the increase in Asian students in top 20 global universities to see.”

So, I did turn to google and at the moment there are 436,585 non-UK students in the UK of which 312,010 are non-EU (figures according to HESA). So, if the UHNWI figures in Asia are going to grow 91% in 10 years, one has to assume that HNWI figures are also going to be pretty extraordinary. This in turn will lead to more international students in the UK.

Now these facts in themselves certainly don’t mean that house prices in London are going to soar. There are several other reasons that will cause prices to increase and as I point out in the talks I give for private banks, solicitors and other institutions, they all have to do with ease of access to credit.

But the point is that London will continue to be a hugely popular global city and it will benefit from the GLOBAL increase in wealth & credit, i.e. not just domestic credit, GDP and all the other misleading figures quoted in the press.

To highlight this point our twelve most recent members have included:

One Danish family

Two Egyptian families

One Russian

Two Canadians

Two Americans

One Spanish family

Two English families based in UK

One British family based in Hong Kong

Something to consider the next time you read an article suggesting that house prices are going to crash because of the high house price to earnings ratio or that Brexit means the end of the world.

The London property market is driven by totally different factors and this has been proven over four centuries. Unfortunately the press and mainstream economists ignore the evidence for reasons that are completely beyond me. This is why it is essential that you rely on first-hand information.

Do you rely on the press for the inside track in your own field of expertise or do you do your own research to give you an edge over the amateurs who do believe what is reported?

And by the way, the press can also be misleading on the upside too. For example, I recently read an article in Landlord News which said:

"Typical property prices in the Prime Central area of London hit a new high of £1,818,262 in 2016, with the market recovering during the final quarter of the year. During the last three months of the year, prices rose 14% quarter-on-quarter and at year’s end, were up by 3.75%, according to data released by the Land Registry."

This is completely misleading - there are more transactions happening but to suggest that prices are at record highs is complete rubbish. Although I am optimistic about the market this year, in many areas prices are still down on the highs of 2014.

So if you or your clients would like to know what is really happening in a specific area and price range, simply email or call 0800 389 4280 (+448003894280 from outside the UK).

Best regards,