Transformations in residential property
Recently at Nicolas Van Patrick (NVP) we’ve been asking ourselves some existential questions.
25 years working in London’s prime residential property market will do that to you!
We know what you’re thinking: ‘Here’s where they tell me they’ve discovered their essence and how different they are to all the other estate agents.’
Actually we are not going to do that – far from it. There are too many similarities!
But shifts in our industry are happening fast and we are conscious of the need to embrace change rather than resist it. So we are spending time getting clear on what these transitions are, and making a commitment to blog about our views.
Stand by, for the real NVP is now standing up!
But before we start sharing our existential findings with you, let’s zoom out and look at the macro trends.
Specifically we want to tailor our views to be of use to our core customer base – family offices making prime residential investments.
Largely speaking, family offices are professional teams who are paid, in principle, for capital preservation. This means they are value investors who think long-term, and make buying decisions in a less emotional, more rational way than your everyday property investor.
You might say this fits well in light of the below trends, in which long-term thinking is perhaps the most prominent thread. Being based in Knightsbridge, our views are also informed by our locality, which has the advantage of significant international investment. While the rest of the UK may be slow, in particular the central London market has a stronger heartbeat. It certainly feels that way to us, having had one of our busiest months in June since we launched four years ago.
There are three main transformations taking place in residential property that you should be aware of:
- The shift to long-termism
The first is the rise of long-termism. Over the years, most especially in the eighties and noughties, UK residential property became a playground for short-term gains. The flip-it-and-get-rich ‘developer mentality’ is now officially a thing of the past, with most of the sales we see being long-term investments, and buy-to-let portfolios largely on hold, as economic uncertainty continues. This newfound long-termism is not only to be found in sales, however. Many new-builds are overpriced, and as such are turning into rental opportunities (some London riverside developments have been block-bought in 20-unit chunks for this purpose). As the rental market is flooded with quality product, tenants are in a more powerful position than ever. They can afford better homes, demand longer leases and expect more protection on pricing when it is time to renew. As such once again it is not uncommon to see people renting property long-term. The mindset phrase ‘an Englishman’s home is his castle’ is truly being shaken to its foundations, as landlords are forced to hand more power to their clients, in order to compete. You no longer have to own your home, to have the same sense of stability.
- The shift to volume over expertise
A long time ago in a galaxy far, far away, Jedi estate agents set out to serve their clients, and their buyers, with the type of expertise and advice that made long-term relationships, trusting handshakes and legacy planning a part and parcel of buying and selling homes… ‘Where did it all go wrong?’ we can hear you exclaiming loudly! As mentioned above, industry-wide volume in sales is down, rentals are up, and estate agents across the board have responded by creating technology platforms and websites which increase the number and speed of transactions, while simultaneously eradicating customer-care and client face-time altogether. This means that the heritage skills of estate agency are being lost, a victim to the transactional nature of life in the 21st century. At NVP we stand for precisely the opposite, largely due to our focus on the top of the market. We know that the homes our clients buy are seen as legacy investments, and as such expertise, client-time and customer services are present in the NVP value chain above all else. They have to be, not just to give buyers and sellers a reason to steer clear of competitive technologies, but also to the protect the unique nature of investments at the top-end of the market, which is NVP’s specialty. We aim to consult and partner, as well as transact, and if the outcome of our thinking is to hold, we are happy advising our clients to do so.
- The shift to central politics
Although recent years has seen waves of nationalism in both the UK and US, seemingly stemming the rise of central politics which began in the mid-late nineties, what is actually happening is record numbers of young voters are coming to the polls for the first time. In the UK at least, it is very difficult to foresee another far-right result like Brexit ever happening again. In the recent general election, if we made one composite voter from the whole country, that individual voted centrally. In fact none of the parties offered such a proposition, and in simple terms the result was a hung parliament – the electorate took the middle road, collectively. We are now seeing the emergence of what is likely to be a highly ineffectual coalition, and the prospect of a new prime minister by Christmas is a real probability. Whoever that is, they will be under immense pressure to give the electorate the central focus it has asked for, as the next general election is likely to be a game-changing vote in which youth has its say like never before, as they seek to wrestle their future from the hands of the baby boomers. In terms of property, this means more of point one: there will be no return to get-rich-quick deals that might happen under a hard-right conservative leadership, and instead investments will be made for the long-term, with more and more people renting.
So, for all but the long-term investor it is a time to wait rather than act. As such at NVP we are in familiar territory and the market is alive and steady – if not exactly kicking – for investors of our kind. The family office is careful, not afraid, and in tune with the longevity of perspective that is required to perform well in these times.
NVP is here to support them in making decisions that complement their responsibilities.
And about those existential questions? More from us soon!