Beyond London - Real Estate Realities podcast
This podcast was originally commissioned for Barclays Private Bank. It has been modified for our International clients.
Is lockdown prompting an exodus from London? In the second episode of Real Estate Realities, the Barclays Private Bank podcast devoted to prime property, we’ve looked at trends in prime and super prime property markets outside of London.
Join property journalist Zoe Dare Hall as we explore the UK’s luxury residential markets and ask the experts for their thoughts on the trends and opportunities in the wake of the COVID-19 pandemic.
In this episode we’re joined by Lucian Cook, Director of Residential Research at Savills; Alex Goldstein, an Independent Property Consultant based in Harrogate; and Stephen Moroukian, Product and Proposition Director at Barclays Private Bank.
Don’t have time to listen to the whole podcast? Dip into the recording at the times below to listen to specific topics:
- Market overview - 3.28
- Moving out of London - 10:29
- Lifestyle trends - 14:56
- Which areas are gaining traction? - 17:31
- Multigenerational living - 21:30
- Interest rates, stamp duty and other drivers - 24:12
- Opportunities - 26:32
Whether you're buying, selling, or investing in prime property, is now the right time? Are we headed for a downturn in prices? And which markets will remain the most resilient? Tune into Real Estate Realities, the new podcast series from Barclays Private Bank, where we give you the inside track on prime and super prime residential markets. We uncover the trends and the opportunities. As global events evolve, we analyse the data and ask the experts for their opinions and insights into what's next for prime property.
Zoe Dare Hall (ZDH): Hello, and welcome to Real Estate Realities from Barclays Private Bank, the podcast series that gives the inside track on prime residential property through the lens of the COVID-19 pandemic. I'm your host, property journalist Zoe Dare Hall and in this episode I'll be asking the experts for their views on the UK prime markets beyond London. Joining me in our virtual studio are Lucian Cook, Director of Residential Research at Savills.
Lucian Cook (LC): Hi, Zoe, really nice to be here. I'm coming to you from our Winchester office, from the board room of our Winchester office today.
ZDH: Excellent, and joining us from his office in Harrogate is Independent Property Consultant, Alex Goldstein.
Alex Goldstein (AG): Great to be here, thank you, Zoe.
ZDH: And from Barclays Private Bank, we have Product and Proposition Director, Stephen Moroukian.
Stephen Moroukian (SM): Hi, Zoe, good to be here again.
ZDH: Hello, everyone, and thank you for joining us in what I'm sure will be an interesting discussion in very strange times. As far as I'm concerned, the past five months have passed by in a bit of blur of homeschooling, battles over that, and totally failing to secure any kind of holiday. But it feels like things are busy property-wise all around me, people are moving, moving home, lots them are leaving London for homes on the coast or in the countryside. Lucian, what has your experience been of things in recent weeks and months?
LC: Yes, well, I just started venturing back up to London a couple of days a week and I think that is, you know, that's probably the most interesting thing to get your head around, doing the commute again, and, and I have to say, like I think like a lot of other people, we've all slightly reassessed our work-life balance over the last few months and that commute to London has, sort of, entrenched those views for me. It's, it's all about getting back into the swing of it.
ZDH: And Alex, what about you? How, how has it been in Harrogate?
AG: I think the Harrogate and indeed the Yorkshire market has almost gone into overdrive at the moment. It has been an incredibly, incredibly busy patch at the moment and let's see how it all pans out.
ZDH: Stephen, what's your experience of these recent weeks of semi-lockdown?
SM: Yes, I think living in the London suburbs as I do, I've got a foot in both camps and so taking advantage of some of the local recreational opportunities that perhaps I didn't get time to because I was so busy commuting has been a really interesting experience. So, I think similar to Lucian that this particular period of time that we're in gives a real opportunity for reflection on some of the ways that we live and work.
ZDH: Yes, definitely. That's right. Well, before we dive in, there are a couple of themes that have been emerging in the UK property press since the real estate markets effectively unlocked, which was mid-May in England and then mid- through to late-June in Northern Ireland, Wales and Scotland.
It seems across all markets, mainstream as well as prime sales and lettings, agents have been reporting record numbers of enquiries as homeowners realise their need for more inside space, more outside space, and also lots of home working space. And it also seems that city dwellers are looking for their slice of the good life as a direct result of the change in circumstances during lockdown.
So, what's the outlook for the UK as we navigate the short- and longer-term effects of the pandemic? Are people really looking for a good life in the country and if so, where are they hoping to find it? So, let's begin by talking about what's happening in the market generally. Lucian Cook, you must have some good numbers that can paint the picture for us. What's the Savills research telling you in terms of transaction numbers and property prices?
LC: Yes, well certainly the resurgence in deals which are being agreed has taken us all by surprise. We got a hint of it back in April. We did a survey of a number of our clients and we were quite surprised at that point, just as we'd gone into lockdown and were experiencing it, that the experience of lockdown had made people marginally more committed to move than they were prior to the pandemic.
By the time we got to June, that balance of opinion was strongly positive, so really I think the experience of lockdown, trying to work from home, being on top of other family members over that period and probably that reassessment of work-life balance that we just talked about has been a major driver for moving and in that respect, I think that's slightly overridden a fairly sobering economic backdrop.
So, whilst we saw during lockdown, unsurprisingly, a very significant fall in transaction levels, pretty much unprecedented, that's reflected in both sales that were agreed in that period and the transaction figures from HMRC, the rebound has been quite staggering.
HMRC is always a bit lagged, so we had some figures for July, they showed that month on month transaction levels across the UK were up 20% but they were about three quarters of July for the previous year, but those are a bit lagged. They are completed sales that have gone right through to completion and a stamp duty return has been made for.
If you look at sales actually agreed, then the figures are incredibly strong. In reality, in the first two weeks of August, those sales agreed were 76% higher than the same period last year across the country as a whole and the market which has performed most strongly has been the top end of the market where I think people have got pretty stable incomes.
They've got quite strong financial security and a lot of equity behind them, and the levels of deals being agreed in those markets are double, are more than double, there have been 113% first two weeks of August than we saw in the same period last year.
Pricing is a bit different, actually. I think just that economic backdrop has made people fairly cautious around pricing. So, whilst demand has come back into the market pretty quickly, I don’t think, and certainly there isn't the evidence to date, that we've had the sort of same upward pressure on prices.
Indeed, if you look at the number of price adjustments which are being made relative to the number of sales, that's pretty much in line where it's been in the period since 2016 when we started talking about Brexit, something we've almost put to the back of our minds of late.
ZDH: Well, it's clearly a positive story in terms of activity and a kind of dramatic rise in transaction numbers there but not such a significant upward trend in prices then, and I imagine the backdrop of the UK's now declared status of recession is another filter we'll need to apply to any property outlook. Stephen Moroukian, how does this picture align with what we're seeing in terms of lending activity?
SM: Yes, thanks Zoe. Look, banks always have to be balancing in environments like the one that we're in at the moment and that can be very difficult. Clearly, looking at what has happened and trying to understand what will happen is something we're all trying to do in a very dynamic market. I think if you look at the period between April and May, that was really peak concern, peak uncertainty as we went through the true effects of COVID in the market.
What Lucian referred to in terms of those transaction levels I think is really encouraging and it's really great to hear. We don’t know what that looks like for the next six, 12 and 24 months but clearly there's a pattern of a trend emerging, potentially. We had the effects of the government schemes such as furlough and the mortgage holidays. Those are beginning to come to an end and what will occur after them remains unclear but the backdrop of the macro economic environment that you've alluded to is bound to have an impact.
ZDH: Yes. I mean it seems that there is something of a honeymoon period right now and the data seems to suggest that. What about buyer behaviour, what are serious prime or super prime buyers looking for right now and Alex Goldstein, are you seeing increased interest in the North from London-based buyers?
AG: Very much so, Zoe. I think if we go back well before lockdown to 2009, say, there were already gentle rumblings that 1% of Londoners and those in the home counties were looking to leave and head northbound. We then had the BBC jobs, they all moved to Salford in Manchester in 2011 and 2012. Channel4 more recently, they've got a footing in Leeds.
Harrogate is another example, consistently voted as one of the happiest places to live and you jump forward ten years to 2019 and that figure of people leaving London and home counties has crept upwards to 13%. So, the impetus was already there.
Also, pre-lockdown, what was quite interesting is that employees were lobbying their employers for more flexible working and better lifestyle-work balance and I think companies have now realised that there is a significant cost saving and lifestyle benefit to their workforce and I think all of these were significant catalysts, really, in propelling and rebalancing the property market and as I see it, the North-South property divide has been rapidly shrinking.
ZDH: That really is quite a striking rise in the number of Londoners moving North in the last ten years. It certainly seems that people are less wedded to London living at the moment if they can make it work elsewhere. So, Alex, what are your clients looking for? Is it the acres of green space, the sense of village life as a lot of recent surveys seem to indicate?
AG: I think it's very much all the things that you would expect. Yes, of course, it's bigger properties and greater amount of outside space. Self-contained offices ideally that are away from the house and set in the garden, again for obvious reasons, is a very high priority nowadays as indeed is having children's play and study spaces and it's almost going to this multi-functional space and the options, more importantly, to provide that flexibility, as is to having the easy connections back to the major cities, London, Leeds, York, Manchester and Sheffield.
Recently I helped a younger client, it was a daughter of a longstanding client of mine and the daughter was based in Shoreditch with her new husband and they were looking to start a family. They were toying with the idea of moving to the home counties and were considering heading to Hertfordshire but as they had a family link back in Harrogate in Yorkshire, they decided that they could get far greater value for money as first time buyers by heading northbound and that's what they decided to do.
ZDH: Plus the free babysitting that often comes with moving near your family, I suppose. So, it seems that the country lifestyle is very alluring but people don't want to cut their ties totally with city life or the need to be near cities. Lucian, is it a similar story from Savills?
LC: Yes, I think so. I mean, I think you've got various types of buyers, actually. I think you've got those who remain quite committed to London and what they're tending to do is to move along the wealth corridors, the established wealth corridors of London. So, the most obvious of those is the one that probably starts in Fulham, runs down through to Wimbledon and ends somewhere just the other side of, of Guildford.
In addition to that, you have those who are thinking about working from home more often but still working in a London office two, three days a week, perhaps. Some of those have moved out to the commuter zone. I think the term probably best that describes where they're looking is accessible countryside – so, they want a reasonable commute on the days that they do commute, but they also want some of the benefits of the additional space, garden space and just sort of outdoor living that comes with countryside living.
I think community for those people is also incredibly important and the feel of the community, and the amenities that are available, particularly if they're looking towards village locations.
ZDH: I’m interested in the idea of accessible countryside locations – what do you mean by that?
LC: So, when we talk about accessible countryside, one of the things that's really important there is the commute into London and that is not just about the straight travel time, it's about the reliability of the trains, the frequency of the trains and the number of people who are commuting on those lines.
ZDH: Stephen, on the subject of trains, HS2 obviously springs to mind… let's touch for a moment on how these types of big infrastructure projects might impact the commercial property market.
SM: Yes that’s right Zoe, big infrastructure projects have always been used as an effective lever by central governments to drive investment and confidence and therefore ultimately jobs, and that’s happened all over the world. Now, we’ve already seen form the 2020 budget a signpost of unprecedented billions to big infrastructure, whether that’s roads, railways, new homes, schools, and so forth. But I think the dynamic will be different this time, there’ll be much more local and regional government influence expected.
I think if we look at the commercial real estate assets for a moment, let’s specifically look at retail, we’ve got large shopping centres all over the country and we’ve got our beloved high streets. Those assets will have to find their price in the market, that’s natural. At this point there’s a lot of uncertainty in terms of what that will actually look like, and it will really only be over the next months and years that we’ll see what the true impact of the Covid overlay will have been.
ZDH: Yes, it definitely sounds like there are a lot of question marks around what’s going to happen in the market in the coming months and years. But let’s focus on what’s been happening recently. Alex – tell me about some of the deals you’ve been seeing since the market opened up again.
AG: Well, I think, overall, Zoe, the Yorkshire market has performed very strongly.
Just recently, in the last few days actually, I've just exchanged and completed on a sizeable family home and this was about 5,000 square foot, detached, you went up a drive and it was essentially set in about an acre of land.
Interestingly, the husband, he worked in central Leeds, he's got a secure financial job but it was the family wanting the lifestyle and the outside space but in particular, this property there was a small annex and a small range of out buildings and that gave them a lot of flexible usage.
So, when it was friends of family, or indeed the grandparents coming up to stay and indeed plays into the whole work from home theme as well, very much in a superstar village. It had a couple of amenities with it, so there was a village shop and a very good pub.
Quite importantly as well there were easy connections over to York, Harrogate, Leeds, and indeed sometimes down to London just for the husband as well and again, that was secured off-market.
Another very interesting property that I'm involved with at the moment is actually a converted historic chapel right here in central Harrogate and that's got six bedrooms and five bathrooms and an orangery, and really is perfect for home, flexi-living.
Very unusually, it's actually got a passive income stream because it sort of partly operates as a guest house, could easily become a wedding venue, but has also been fairly prolific on the creative side and it's being used regularly by high end magazines for photo shoots and indeed some filming as well and again, because of these points, the property has got, I feel, London and indeed international appeal. You've got the whole life-work balance and indeed the income generating option as well.
In addition, there's been some interesting ones in central Harrogate in the duchy and this is a very prestigious area right in the centre of Harrogate and again, I've been involved with a few sizeable deals and transactions on family homes ranging from between one and a half million up to three million.
ZDH: So, definitely some good value for money deals for the right buyers there and I have to say, I love the idea of superstar villages, that sounds like a theme in its own right. Lucian, what other kinds of deals are on the table and what else are you seeing demand for?
LC: Yes. Well, I think some of it's location and some of it is about the property. When it comes to property, it's a lot of the things that we've already talked about. So, it's garden space, separate space to work from home. I think the other one that people have realised has become critically important not least of which is apparent as we were preparing for this recording, is the importance of good Wi-Fi and I think increasingly people will be paying attention to that when they look to buy their new home.
But, when it comes to the areas that we're looking at, just backing up some of the stuff that Alex has said, if you go to Yorkshire and the Humber and you look at where the demand has been strongest, we've taken some data from a data provider called 20CI and they look at all of the properties marked as sold subject to contract each week across the country and the three local authorities that have performed strongest in that area of Yorkshire and the Humber have been Rydale, Harrogate and Hambleton.
So, very much the more affluent markets which give you all of those lifestyle benefits.
In reality, though, the markets that have even out-performed those have tended to be those within the commuter zone of London. So, very strong demand for the likes of Guildford, Saint Albans and Winchester.
I suppose what's interesting about those areas is in the period, essentially, since the credit crunch, what we saw was the prime urban living in those areas became slightly more popular than buying your village or country property and I suspect the experience that we've had of the recent past means that that reverses slightly. Because we saw that trend since the credit crunch, actually, we saw the performance of those prime urban properties outside of London in the uber-towns out-perform the neighbouring villages in the countryside.
That created a bit of a value gap, so this slight rural renaissance that we're seeing at the moment actually comes at a time when those village properties are looking pretty good value.
So, particularly that country house market has been something of a sleeping giant for quite some time now and it does mean in terms of what you can get for £1 million, £2 million, whatever the figure might be then you're getting a lot more for your money in those locations. So, a bit of the reversal of the trends that we've seen, I would say over the past, over the past decade or so.
ZDH: Yes, and I suppose prime and super prime buyers will always want to have a foot in around London still. Does that interest and that investment stretch into the regions, though? Alex Goldstein, what are you seeing?
AG: Very much so, Zoe, at the moment. In the north, all the talk is currently about the football, of course, and Leeds United are back in the Premiership and it does and it has made a major different to the market and again, you look historically at the difference that that made when they were back up.
This is now driving international investors and they'd always historically focused on Manchester, obviously you've got the two major clubs there but you've now got that connection, you've got this whole band stretching across the Pennines from Manchester heading over to Leeds and arguably slightly beyond, and that entire area still has very good access back to London.
So, for example, and it's the journey that I do if I go to London, York, direct down to London, you can do that in under two hours quite happily. Leeds down to Kings Cross, that's just over two hours and you can even now go direct from Harrogate to London Kings Cross and that takes about two hours and 55 minutes.
ZDH: So, still looking at lifestyle trends, I imagine many of our listeners will also think about how we live in the future and lockdown has certainly emphasised the need for those who can to be close to family. Alex, you mentioned earlier the demand for annexes and outbuildings, can we extrapolate from that that people are looking more at multigenerational living?
AG: Very much so. I feel that there is a, a cultural shift that's coming full circle precisely because of the pandemic. A, a couple of recent examples I've had where, where families are actually combining, they're coming together with grandparents who are living on-site but they’re in a separate cottage and they can be there now for childcare, sometimes sort of school work and equally, they can be looked after and feel secure themselves. And, again, it plays into this demand for larger family homes with outbuildings that are very attractive.
Generations are combining their funds and reducing their risk and another trend that seems to be emerging is just this sort of gentle move away from urban living and this want and need for having everything on one's doorstep. I think let's be clear, in a post-COVID environment, I think it's very clear we all want the good life at the end of the day, we want to be self-sufficient in our own little bubble and happy.
Now, to drive the twenty minutes or so to the nearest urban centre, I think it's very much the driver of wanting and having that space and the openness, the views and having that key, flexible lifestyle at home both in terms of how your rooms are actually utilised within the house but also how that combines with your work lifestyle as well Again, it's having that need to quickly get back over to wherever the major city is that the employer is in.
I've had an interesting recent example, one client of mine he runs a fairly major IT firm, he's the managing director and he's currently got offices in Edinburgh, Leeds and London and one over in the United States and it's only really just dawned on him in the IT business that he can run his business remotely and very efficiently indeed.
Now, he was going to buy a second property, a bolt hole in London to be close to the office for whenever he was down there but he's now put a complete hold on that and he's actually investing back in Yorkshire.
ZDH: Interesting that it’s taken lockdown for that mindset shift. Stephen, from a lender’s perspective, if interest rates are going to stay lower for longer, do you think this could potentially have a positive effect on transaction numbers and the knock-on effects on the wider property economy?
SM: Interest rate reductions have been off the back of two shocks in the market – the global financial crisis of 10 years ago, and this current crisis we’re in. Rates in general show no sign of increasing, and therefore the cost of borrowing remains incredibly low compared to the 30 years that preceded the global financial crisis.
The opportunity for some borrowers, of course, is to then buy that bigger property in the cycle, or making an existing asset work a lot harder for them. I think in terms of the wider economy, that question remains one that’s related to what happens after the government schemes transition.
ZDH: I think a lot of people would agree with that cautious outlook. But what are some of the other factors that are likely to have an effect on the market in the coming months? Like stamp duty. Lucian?
LC: Of course, we have a stamp duty holiday coming to an end in March of next year, I think that will support the market in the first quarter of next year, as is always the case when people can see an increase in stamp duty on the horizon, they will do pretty much anything in their power to avoid paying that, even if that means paying a little bit more for the property that they're buying.
I think thereafter, the recovery in prices from 2021 onwards, I think it's more likely to have sort of sustained upward traction from in 2022, interest rates remaining low, economy back on its feet.
Again throughout that period, I think what you'll see is some of the lifestyle changes that we've talked about playing out in which properties in which locations are in the most demand. And so, when we talk about some of those lifestyle drivers, it's also important to remember that's not just about people who are upsizing and looking for more space.
One of the things that we've found is that, increasingly, that older population who have been quite reluctant, historically, to downsize, the experience of the pandemic has made them much more open to that and that is supporting some of the prime urban markets, particularly some of the new-build property in some of those areas and areas such as the likes of Clifton and some of the markets in, similarly, somewhere like Bath.
ZDH: A lovely part of the country, and Alex, I hear you've been involved in a deal recently in another very pretty spa town, Ilkley in West Yorkshire.
AG: I have indeed and it was a property for a client actually relocating from Los Angeles over in the States and they needed access down to London and Manchester as they were in the media. And Ilkley just seemed a very obvious choice with all its amenities and equally, very well connected on the train so it's pretty easy to get down to London, across to Leeds and Manchester as well and there's some very good, outstanding even, schools locally.
What was interesting as well on this one, this was conducted again off-market but we also had to go over guide price in order to secure it.
ZDH: I suppose I can't really ask you how much your client's paying, Alex, but I wonder if there are some relative bargains outside of London. Lucian, can you share any examples?
LC: Yes, I think perversely, actually, you almost need to look to the very top end of the market to see where some of the bargains are. So, we've suggested that that top-end country house market has been something of a sleeping giant for a number of years and we've also talked about the prime central London market where values have been off somewhere like 20%.
Because the profile of buyers in, say, the likes of Saint George's Hill, Saint George's Hill in Wentworth, sorry, it often is a bit more reflective of that prime central London market than some of the other prime country house markets. That market also is looking relatively good value, particularly in terms of the square footage which you're getting comparable to some of the other locations they might look at such as sup-, such as central London.
So, we've seen a real resurgence in demand in some of those markets, and then really that I suppose is also representative of a number of micro-markets. Another good example then would be the market, say, down at Sandbanks, down in the Bournemouth Pool conurbation, a market where location is of course absolutely paramount and all important but which commands some very high values, but nonetheless is looking relatively good value as things stand.
ZDH: Well, we've covered a lot of ground there. Final question to all our guests, if you could move to the country tomorrow, where would it be? Alex, if we could pry you away from Harrogate.
AG: That's an easy one, I'm going to see you on the East Coast over at Whitby for some proper fish and chips.
ZDH: Great, okay, and Lucian, where's your dream country property?
LC: Well, I already live in the countryside. I am very much a rural boy, I grew up in deepest, darkest Somerset, but I've managed to migrate to Hampshire. Both of those I have affinity for. If I was having to move, though, I think I would probably go back to that area of North Somerset, access to Bristol and Bath, access to some exceptional apple-based cider and equally, not a million miles from the Mecca for me, which is Taunton and the county grounds where I can go and watch my beloved Somerset county cricket club.
ZDH: I love it, Taunton as the Mecca, and Stephen, your escape to the country, where would that be to?
SM: Yes, well I probably should say Windsor because that's where my in-laws live but of course, I'm a fan of the sea, as is my family so I think we'd have to be on the coast somewhere and that really probably looks like the South Devon coastline.
ZDH: Yes, I'm with you there, Stephen, it would have to be coastal for me, too. I think I'd like to do the impossible and transplant my leafy London village of Blackheath and put it somewhere lovely on the South Coast and then obviously hope there are some fast trains to get me back to London if I need to. So, thank you to all our guests for your expert insights. Just say goodbye to all of you, Lucian Cook, Director of Residential Research at Savills.
LC: Thanks, Zoe, it's been my pleasure.
ZDH: Alex Goldstein from Alex Goldstein Property Consultants.
AG: Thank you, Zoe. Great to take part.
ZDH: And Stephen Moroukian, Product and Proposition Director at Barclays Private Bank.
SM: Thank you very much, Zoe, see you next time.
ZDH: I hope you've enjoyed this episode of Real Estate Realities. Join us next time when we're going to be taking a virtual trip to the sunny south of France to check in on the prime property market in the French Riviera. Thank you for listening.