The property market has long been a staple conversation topic in the UK, rarely a day goes by where the subject isn’t covered by the press or making the news on TV. This week The Wealth Scene caught up the well-known buying agent referred to as “the BBC’s favourite property expert” and winner of the 2015 LSL Property Commentator of the Year Award – Henry Pryor.
Your entire working career has been very much embedded in the UK property industry, was it your ambition from a young age and why?
No, I started in property by accident. I was going to go to the Royal Agricultural College at Cirencester but went to work for Savills for some work experience and was “distracted” by their offer of £2,000 a year to stay. In 1983 that wasn’t enough to get taxed but it was enough to get my attention. I loved it! I learned a huge amount, met fascinating people and was fortunate to work as the profession moved from Tweed Jackets and steaming spaniels into the world of Big Bang – a time when if you got results you were rewarded and promoted. When I joined the firm had 400 staff. Today I think it has over 8,000 worldwide. They’ve not done badly with my legacy!
Would you say you have a genuine passion and appreciation for property itself, the property market/industry in general, or more the thrill of the sales side of business?
The basic job is the same if you are selling a £100,000 home as if you are selling a £10m home. The difference is that at the top end the people you are dealing with aren’t fazed by the process and are by definition usually much more interesting. If you’re hiring me to help you buy a £20m estate then you will have some experience of the world. I’m fascinated by the people as much as the properties and I love the art of deal making – something that I think is under-estimated by many.
Tell us a little about your experience when you bought your first house
I bought my first and only property for £87,000 when I was 32. I sold it seven years later and have been a tenant since. I rent a house in the country that I could never afford to buy and wouldn’t be for sale even if I could. Unlike many people I have no emotional “need” to own my home although clearly like many others I would have made money had I done so.
They say that all those who advise people to buy or sell property should be forced to move every decade, just to appreciate how frustrating it can be. I have family members who have bought and sold so I have kept my eye in but having been lucky enough to find the perfect home 20 years ago I haven’t needed to move since.
You are well known in the industry for correctly calling the top of the property market at the end of 2006, citing at the time “sellers motivated by greed” as the primary reason and subsequently being published by the Financial Times as a result – great call at the time with it being proved correct, but have you encountered any surprises in the market that have really gone against the data at the time?
“Prediction” said nuclear physicist Niels Bohrr “is very difficult, especially about the future”. I was fortunate in 2007 to heard above the champagne corks that were popping at the time. Going against the tide is tough but just as now, it all felt too good to be true and I couldn’t see how people would continue to fuel a rising market. If I’m honest I am surprised that the current market has inflated for as long as it has – but then like many people it took me longer than I would have wanted to understand exactly what the impact of quantitative easing would be. In the history of evolution no one ever saw the end coming – the Mayans, the Aztecs, Conquistadors, the British Empire all demised with surprise. So it will be with the current market and only the prepared (and well advised) will cope with what’s coming.
As the BBC “go to” person for housing market commentary – have you ever been tempted to consider a career move into media/TV?
The rolling 24 hour news cycle means that radio & TV has an insatiable appetite for comment on news stories. I have been extremely fortunate to have been asked to contribute but it’s not a talent that has got me these gigs. I have three rules for broadcast media – if I say I will turn up then I will. I won’t swear on air and I may, just may say something interesting. Three minutes of live radio or TV is hugely exciting but I don’t actually enjoy an audience and decline speaking invitations. So no, I’ve not been offered or been tempted to be the moth to the media’s flame.
House Prices – Rarely does a day go by without house prices being mentioned in the press for one reason or another and it’s not unusual to see stark contradiction in the statistics across different publications creating a confusing picture for the public. How do you assess what’s really happening in the market?
Strip out the new-build flats being sold in Central London and my estimate is that the market is off 10% already this year. Investors buying flats in Battersea Power Station are not (in my view) buying real estate. They are buying currency that happens to be delivered in bricks and mortar. Its a hedge for the majority of international purchasers and its regarded by domestic buyers as an “investment” believing that the capital values must rise. This is certainly not the case and makes me cross.
Investing in property (or any asset) is about the return or yield. Capital appreciation is called gambling and should be done on a racecourse! Residential property investment needs to offer a 6% + return. Those accepting 2 or 3% net yields and banking on the value increasing will crash. They are what I call Icarus Investors. Flying too high and doomed to fall.
There are many factors that influence house prices (some more than others of course) perhaps the most debated at present is “supply and demand” – is the market as simple and straight forward as that or are there more underlying issues affecting property prices?
House prices are not based directly on supply and demand but on the availability of credit. Sure, there is some sentiment but by and large if you let people borrow £10 more then they will and they will give it to the person who owns the property they want to buy. The UK Governments ill-conceived Help to Buy scheme is proof of this.
With no appreciable increase in supply all that has happened is that today’s buyers are paying more for the properties whose prices have been driven up by the other buyers who have been given money they couldn’t otherwise afford. It’s nuts and will end in tears. We have now got to the stage where kids are borrowing money from their parents who are mortgaging or selling their homes so that the kids can afford the prices that their parents generation are asking. It’s like some twisted financial perpetual motion machine or what some people refer to as a “Ponzi scheme”
Having brokered some very pricey property for clients over the years how would you say the market and buying process differs at the upper end? (if at all)
It’s more complicated but not impossibly so. People have more complicated funding arrangements, more difficult tax arrangements that they need to consider, they have other considerations – kids, ex-spouses and businesses all of which can impact on their choices. Most of all at the very top end buyers view property like they view a watch or an expensive car. “Value” is not an issue, it’s about sitting with their friends at the Eden Rock hotel in Cap Ferrat and saying “yes, a little place in Sw3”.
As the saying goes, if you have to ask, you can’t afford it! Many don’t borrow to buy a £10m flat so a mortgage valuation is not an issue. 40% of all purchases today across the entire market are “cash” deals. The market is becoming less bothered with “value” and much more interested in price. As their adviser I often have to remind them “Price is what you pay, value is what you get”.
In the UK where do you see the most value to be found over the short term and the long term and why?
If I had to invest in UK property I’d be looking at old-fashioned development which could happen anywhere. I would take an ugly duckling like an old pub say and convert it into something more valuable. The days of buying something, sitting on it and it being worth more tomorrow are behind us. The savvy buyer will find something that needs turning through 90º to appeal to a different, wealthier audience.
The role of buying agent is perhaps more well known in the USA, how does it fit into the UK property industry?
Agents don’t have to try too hard with most buyers. For a start they aren’t brokers trying to craft a mutually satisfactory deal that both sides can be happy with, they are agents acting on behalf of the seller paid to get the best deal they can for their clients. By and large selling agents are much more nervous of me. Whilst most buyers won’t be back at the estate agent for seven years I could well be back next week. I bid on a house a week and buy one once a month. This year I expect to buy up to £100m of residential property.
How do you feel about the property industry overall in the UK at the moment?
My industry has an unenviable reputation so I spend a good deal of time with like minded folk trying to do what I can to improve it. There are now three ombudsman schemes and Trading Standards are at last taking more of an interest in the sector but the latest exposés of the use of high value property for money laundering purposes is something that estate agents and lawyers need to clean up. It’s a scandal and an international embarrassment and one that the Prime Minister has declared he wants to sort out.
Aside from sourcing properties for clients, what else are you working on?
I am working on two novels which I hope will be published next year and a series for BBC television. It’s a bit hush-hush but revolves around the science and psychology of buying. On your screens Easter 2016 we expect.
A radio program looking at possible solutions to the housing crisis is being recorded with particular emphasis on the so-called NiMBY (Not in My Back Yard), those who don’t want their corner of the country spoilt by hundreds of new homes being built in their back yard.
If you require a buying agent or assistance acquiring the right property, Henry can be reached via his website HenryPryor.com
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