Warren Buffet’s View on London Property

Do you? Don’t you? Hands up if you are one of those people always considering buying a property but never committing for not knowing when the ‘right’ time is.  

We caught up with Jeremy McGivern, the Leading Expert on London Property, author of ‘The Insider’s Guide to Acquiring Luxury Property in London’ and Founder of Mercury Homesearch, London’s premier property search agency to find out what he has to say on timing it right…

In 2003, Roger Bootle, formerly chief economist of HSBC and one of the Bank of England’s ‘wise men’ said, “House prices will fall by 30% in the next four years”.

In fact, house prices doubled in many parts of the UK during those four years. He couldn’t have got it more wrong.

Unfortunately, many people decided not to buy because of Bootle’s advice – after all, he was supposed to have a better understanding of economics than anyone else and he had access to better data being one of the Bank of England’s “wise men”.

I mention this because in times of obvious uncertainty, many people want to avoid making an expensive mistake and looking stupid. Negative opinion is also given greater credibility because, as it is likely to be the consensus opinion of the time, it is safe to follow it. After all, you will look less stupid and be less embarrassed if everyone else is in the same boat.

One person who noticeably goes against consensus opinion is Warren Buffett, an American business magnate. In the run up to the dotcom crash, Buffett was derided as he refused to get caught up in the tech boom because he didn’t understand how AOL, Pets.com and other dotcom darlings made any money. He was regarded as “past it” and “too old” to understand…

Ironically, he seemed to do reasonably well during the early 2000’s, was also in a moderately strong financial position in 2008/9/10 and was buying when everyone else was predicting the end of western civilisation…

Interestingly, Berkshire Hathaway Real estate owned by Warren Buffett, has recently opened a franchise in London just as transaction levels are at all-time lows and the consensus opinion is that London is doomed. A sign we should be following?

Now, you may be reading this thinking “I am not Warren Buffett and this time it really is risky to buy in London”, but history has proven that the best times to buy in London were when it seemed very risky.

Just consider the following:

1. 1950’s = the collapse of the British Empire – a slightly bigger issue than Brexit
2. 1970’s – The UK was known as the “sick man of Europe”
3. 1970’s and 1980’ – sustained IRA attacks
4. 1992 – the UK is thrown out of the European exchange Rate mechanism
5. 2000-2002 – Dotcom crash, 9/11 and the terrorist attacks in London plus a recession in the U.S.

Right now, we are nowhere near that stage of over optimism – which is when Buffett says you should “Be fearful when others are greedy.” Indeed, pessimism and fear currently reign which is exactly when Buffett says “you should be greedy when others are fearful”. So rather than being swept away by popular opinion and misleading headlines which ignore the underlying facts, would it be unreasonable to dig beneath the “noise” and consider what is actually happening?

1. According to Wealth X, the world’s ultra wealthy population, or those with $30m or more in net worth, expanded strongly to 255,810 individuals.
2. The combined net worth of the ultra high net worth (UHNW) population increased by 16.3% to $31.5trn in 2017 (2018 figures are not available yet).
3. The global UHNW population is forecast to rise to 360,390 people by 2022, an increase of almost 105,00 compared with 2017. The level of UHNW wealth is projected to increase to $44.3trn, implying an additional $12.8trn of newly created wealth over the next five years.
So, the number of UHNWI’s who historically have been exactly the type of people to buy in prime central London has increased significantly (as has the number of HNW individuals, i.e. those with $5m-$30m) and their wealth is increasing at an extraordinary rate.

What affect do you think this will have on London residential property?

Meanwhile, companies and funds have been investing heavily into London, as they know it will remain a major “global hub”. Indeed, “in the first half of 2018 international investors spent more on commercial property in London than in Frankfurt, Munich, Paris and Manhattan combined.” (Source – Knight Frank).

Is it ridiculous to suggest that residential property will follow suit especially as prices have fallen significantly for international buyers?

Of course, anyone can follow the crowd, but if you want to get ahead of the masses and achieve better results, then you need to do the opposite to them and be greedy while others are fearful. This is your chance. Most won’t seize this opportunity, but you can. However, you need to be selective. Buying blindly in a new development or relying on the internet is what the masses do. You need to act differently to buy better properties that will outperform.

So, if you would like to find your ideal home or investment property, you can discover the strategies and tactics I have been using for over 18 years in my Insider’s Guide. Amongst other things, the book will show you how to source off-market properties and negotiation techniques to help save you money in transactions.

If you are planning to acquire a property in London then you can request a complimentary copy of “The Insider’s Guide” by emailing veronika@mercuryhomesearch.com or What’s App +44 2034 578855 with your name and delivery address.

Other similar posts