Neal Hudson

What is the point of owning a mansion in Mayfair? London’s luxury property market has bigger problems than the ‘exodus’ of wealthy non-doms

The chart is from my recent article that pointed out just the stamp duty on a Mayfair mansion is equivalent to several years rent!

www.ft.com/content/e4e4...

It’s both but central London stuff has been stagnating for over a decade following all the tax changes. Though interestingly when you look at the price of transacted properties on a £/sq ft the fall hasn’t been as severe as the estate agent stock based indices.

Long time ago now but was surprised to get a call from them when I was a newly employed graduate. Realised it was just after my name had appeared for the first time on a company (Savills) publication which they clearly monitored for leads. They kept calling over the years and I kept laughing at them

The snail farmer of London, his mafia friends, and a £20m vendetta against the taxman Terry Ball runs elaborate mollusc-based tax avoidance schemes that are costing London councils millions of pounds. Yet when London Centric tracks him down, an even stranger story emerges.

I think this is the weirdest story I've ever reported. www.londoncentric.media/p/terry-ball...

There's a lot of people out there (apparently incl. Gov) that don't realise we can have a massive number of people that need new homes but, at the same time, a problem where there's very limited demand for new homes because prices and rates are too high while construction viability is squeezed.

Reducing the affordable housing on new developments in London might improve their viability on paper but it's unlikely to reduce the price developers charge for their market homes.
Demand is constrained at current prices, so there will still be a limit to how many they can sell and hence get built.

The result of racing to meet the 1.5million target with no clear statement on what outcomes are desired comes with severe risks. It risks us ending up with a new build market that is focussed on delivering numbers as quickly as possible to the exclusion of all other metrics and is enabled by deregulation, tax cuts, and subsidies. That will inevitably lead to housing outcomes that compromise on quality, safety, environmental protections, and the needs of the actual residents. That doesn’t look like success to me, and it shouldn’t to this Government either.

As I wrote back in Feb:

London set to loosen planning rules in drive to boost housebuilding UK housing secretary and mayor in talks to make provisions on windows and bicycles less onerous as construction slumps

London set to loosen planning rules in drive to boost housebuilding
on.ft.com/42NFr06

This reminded me that our supermarket in Cairo in the mid 1990s had a random selection of games consoles for sale. I recall a NeoGeo and Atari Jaguar. No Nintendo products but I think there was a Sega CD.

Homelessness stats just out show another new record in households (132k) and children (172k) living in temporary accommodation. Up 7.5% in last year
www.gov.uk/government/s...

Even the affordable homes funding programme doesn't match their aspirations.

It was nuts from the first time they announced it.
Trying to hit 300k pa by the end of the parliament might just be achievable if they're lucky with mortgage rates etc.

I hope it goes well for you. Wider challenge with current model is that developers need a large % of off-plan sales years before completion to unlock funding. Since GFC, Asian middle classes could get finance locked up for those timeframes but domestic buyers couldn't.

Congratulations. How long before completion?

Yep. The challenge is our current high-rise delivery model is based on off-plan sales. Historically via the domestic BTL market, then the overseas BTL market, and more recently the institutional BtR market. We've killed off those markets with tax and interest rate rises. Need to fix or change model.

As a side point on the Molior slides, it's worth keeping this GLA chart in mind too.
Molior is useful for trends in the market but they appear to only capture about half of the London new build market. Hence, I'm always a bit cautious about their absolute numbers.

No. Right now the bottleneck is a lack of demand at current prices.

Did the Royal Yacht tour in the summer and was impressed by how much space outside of the royal quarters was dedicated to drinking.

Saturday night at the Rec.

Cohort closes £18.2m facility for super-yacht in one weekend Cohort Capital has closed a loan of £18.2m for a borrower in one weekend for a €22m super yacht.

The £18.2m loan arranged over the weekend to meet the down payment on a super yacht is still my recent favourite!
bridgingandcommercial.co.uk/article/2063...

A quick £15.75m bridging loan arranged between exchange and completion on a £22.5m house in Chelsea

(another reminder that these markets are more debt dependent than the agents might tell you)

bridgingandcommercial.co.uk/article/2179...

Looks like a Lendlease/Crosby Homes development.

One of the many depressing things this year was realising that there is no clear strategy across the whole of government and not just with housing.
(1.5m new homes is a target, not a strategy)

As I wrote back in Feb, the government's focus on building homes with no apparent strategy beyond "planning reform" is dangerous and their ongoing failure to hit their stupid 1.5m target makes is more likely they'll be stuck with only the bad options to choose from.
builtplace.com/still-search...

But the previous government screwed HAs ability to perform that role this time around.

Data isn’t perfect but I’ve got s106 (incl partial grant) holding up after the GFC at least until post 2010 so even that’s not totally cyclical. But my broader point is that previous downturns have seen funding for the HA sector to maintain delivery - that’s how they really started in the 1990s.

I’m not sure they understand themselves. Last decade or so has seen the big London ones playing at being developers, buying land banks at the top of the market, and “re-inventing” HA finance. While at the same time ignoring their existing stock and residents except as an asset to borrow against.

Just on s106. It’s crazy that the gov hasn’t done more given their 1.5m aspiration. Delivering s106 affordable at the start of a development is a great way to lower risk in markets like this. Also highlights how we’ve compromised the HA sector - they were viewed as counter-cyclical for a reason.

Hearing that “build baby build” has not gone down well with the industry. The promise of yet more planning reform just creates more uncertainty (as does all the tax chatter). What they really want is Help to Buy v2 and HAs to take their s106 affordable off their hands.