ROCK SOLID: Middleton Q3 update
1st October 2016
Reasons to be positive.
In the most obvious way possible, Q3 2016 has been unlike any quarter any of us have known. Bizarrely, in most other ways the ‘Brexit quarter’ has been business as usual. The 23 June tremors have, to date, been considerably less shocking than those that were felt after 15 September 2008. Less than 12 months after we established Middleton Advisors the Lehman Brothers collapse provoked what is routinely described as ‘the worst economic crisis in living memory’. We thrived then, and we see plenty of reasons to be positive in the current climate.
The unexpected economic response to the 23 June result; the uncertainty of the Government’s position and strategy for Brexit; and the likelihood of predictions being further confounded makes us more convinced than ever that the keys to prime property acquisition – whether for lifestyle or for investment – are the focus, independence, trust, diligence and knowledge on which we have built the Middleton business.
Instructions up 42%
Longer term, of course, the Brexit effect has yet to become clear. But a comparison of our topline indicator shows a healthy 42% increase in the number of houses we were instructed to buy in the ‘Brexit’ quarter (Q3), versus the same period in 2015.
Rupert Bradstock, non executive chairman of Middleton, says: “Having worked in this industry for 30 years, the single thing that has consistently moved the prime property market has been the exchange rate. Historically, a weakening of the pound has been positive for the prime market in London.”
“With money so cheap on a five-year basis, there is plenty of stimulus for the lower end of the prime market in London, and in a virtually interest-free world, cash invested in property can hardly fail to out-perform cash in the bank.”
“However, the biggest impediment to the prime market has been the stratospheric increases in stamp duty under George Osborne. Trading costs are now approaching 20 per cent for anyone spending more than £5m on a second home, and the obvious beneficiaries of this are architects and builders, with owners encouraged to extend rather than buy again. Fortunately, in some ways, the Brexit-driven exchange rate movement has virtually nullified stamp duty increases for overseas investors in London property.”
“Of greater immediate significance, even than Brexit, is 23 November, when the Autumn Statement will give the first real indication of what sort of Chancellor we now have.”
What sort of Chancellor do we now have?
The Financial Times has concluded that Hammond’s personal experience is likely to make him entrepreneur-friendly, but does not expect ‘continuity’ – and is expecting him to ‘shake things up’. ‘Tax cuts and a building bonanza’, predicted City AM in the last few days.
Fortunately, Philip Hammond is no stranger to the ups and downs of the property sector. The Times reported in July, ‘As the majority owner of a medium-sized construction firm, Philip Hammond knows …. all about losing money. Castlemead Group, his Wrexham-based property development and building business, plunged to an annual loss of £655,000 in the year to March.’
London remains attractive. Business as usual in the country.
From a purely financial point of view London retains much of its attraction for overseas buyers, and many of the features of the city that have attracted people in the past remain – political stability and security, schools and universities, its cosmopolitan make-up and cultural richness. The country market too, is behaving much as would be expected in any other year. And if anything, Londoners are looking beyond the M25 and seeing good value.
We look forward to helping our clients and partners negotiate one of the most interesting and tumultuous periods in the UK’s modern economic history. We remain committed to providing the very highest levels of service and independent advice to all of our clients and business partners.
Mark Parkinson, Head of Middleton London
Tom Hudson, Head of Middleton Country