The Great Brexit Bargain Hunt as house buyers see a golden opportunity Financial Mail
Boss of one of Britain’s largest private landlords pushes the case for renting
IT’S a view that might grate with ‘Generation Rent’ who can’t get on the housing ladder. But Helen Gordon, the chief executive of Grainger, one of Britain’s largest private residential landlords, is trying to convince me that some younger people are renting out of choice, not necessity.
‘I think there’s a younger generation coming through that don’t have the same views on ownership,’ says Gordon, 59. ‘They rent their cars, they rent their phones, they rent their music. They don’t have that same concept of ownership as perhaps an older generation did.
‘Part of it is lifestyle, part of it is cost. I meet lots of people who say, “I can rent a better quality property than I could buy.” ’
Grainger, a FTSE 250 company worth £ 1.4 billion founded more than a century ago in Newcastle, is among a new group of landlords offering American-style complexes where residents pay rent and get other services thrown in.
That could be anything from concierges, cinema rooms and gardens to broadband, gyms and any repairs that need doing. The number of so- called ‘build-to-rent’ blocks under construction by firms such as Grainger has jumped 40 per cent in a year amid rising demand for these new homes. It’s not just a London phenomenon, either. In November, Grainger completed the largest build- to- rent complex in Manchester, where rents start from £730 a month, with others in the pipeline in Leeds, Birmingham and Bristol. It has nearly 5,000 rented homes under its watch.
Saving up to buy a home is still very much ingrained in the British psyche – even with prices as high as they are. But Gordon thinks the emergence of such high- quality rental homes – rather than the traditional fare offered by part-time buy-to-let landlords – is fundamentally changing people’s attitudes about buying a house.
‘Instead of doing what they did historically, which is buy a one bedroom flat and upgrade to a two bedroom flat and then they start a family and have a house, I think people will pause and rent for longer, maybe start a family – we know 36 per cent of renters are families – and then decide where they want to buy,’ she says. With Grainger, Gordon says, renters can sign threeyear guaranteed leases – giving them a level of certainty that’s rare in the private rental market, where landlords can turf out tenants at a month’s notice. Grainger doesn’t ask for a deposit, either.
This, I venture, sounds like a very European approach to housing. On the Continent, renting is popular and doesn’t face the same levels of criticism from both sides of the political spectrum as it does in Britain.
Gordon says: ‘I used to look after units in Germany. People would live in Frankfurt or wherever and when they come to the end of their career, they’d use part of their pension pot and go and buy something in a really nice rural location.’
We meet at Grainger’s London office overlooking the Thames, just as another report suggests house price growth has ground to a halt and is even falling in some parts of London. Buy-to-let landlords are quitting the market amid the price woes and a flurry of tax rises that have made it hard to turn a profit.
Gordon doesn’t think we’ll see a cliff- edge in house prices after Brexit: ‘ I think it’s what we’re already seeing, which is a slowing down of the level of sales.’
However, she hits out at stamp duty and other taxes keeping people from moving house and stopping some from downsizing. Stamp duty, she says, is ‘not necessarily a good thing’, even if it is for Grainger as it keeps people in rented homes for longer.
Since Gordon took charge three years ago, Grainger has sold off its retirement home business and its German division t o focus on build-to-rent in Britain as the country grapples with the housing crisis. Its focus is not on the top or bottom ends of the market, but aimed at the ever-growing middle-classes.
Brought up in Manchester, she went to Oxford Polytechnic before going on to work for Milton Keynes Development Corporation, which oversaw the new town’s creation. After a decade at John Laing, now part of Laing O’Rourke, where she became the first female director, Gordon joined Railtrack as group property director, responsible for station developments. When it went into administration in 2001, Gordon moved to Legal & General to run its property operations before moving to Royal Bank of Scotland.
It was a mammoth job – to sell off the bailed-out bank’s £38 billion global property portfolio in the wake of the financial crisis. After managing to shrink it down to £ 4 billion and her job nearly done, Gordon took over at Grainger. Softlyspoken and diminutive i n stature, she seems an unlikely person to have climbed to the top of the notoriously maledominated property industry. A significant proportion of the attendees and trustees of the Presidents’ Club Charity Dinner a year ago – where hostesses were sexually harassed according to an undercover Financial Times investigation – were property industry executives. But Gordon claims the perception of the industry as sexist is ‘a little overplayed’ and the behaviour at the Presidents’ Club ‘didn’t reflect the whole industry’.
As vice president of the British Property Federation, Gordon hopes more women can go on to run property companies, not just sit on the boards. She says there is ‘a lot of work to do’ and that the industry also needs people from different backgrounds too.
‘I feel quite strongly that it’s not just who we recruit in the industry, it’s also where they come from as well. Our industry has to reflect the people we’re building for, and quite often it doesn’t.’
She defends the housebuilders which have come under pressure for dishing out huge bonuses for bosses, claiming they no longer follow the old ‘build it, flog it and run’ mantra ( some newbuild owners may disagree). That she doesn’t lay into the housebuilders doesn’t surprise me – after all, she could be running one of them one day.
Gordon, who made £1.5 million last year, doesn’t rent her own property in affluent Regent’s Park. She has owned it for 24 years.
I ask her what property advice she gives her nieces and nephews. ‘I’d probably give the advice that sits alongside our business model which is when you buy your first house, imagine yourself living there for the next ten years. And if you can’t, don’t do it.’
At least she doesn’t have to tell friends and family how much their house is worth any more. ‘Thank god for Rightmove!’ she says.
I think many will pause and rent for longer – then decide where to buy
Our industry has to reflect the people we’re building for... often it doesn’t
WHERE are house prices heading? It is a burning question many homeowners are now asking themselves as they assess whether it is either time to move and pick up a bargain, or stay put and hunker down for the foresee- able future. Unfortunately, there is no definitive answer. Whichever housing survey you scrutinise or estate agent you speak to (admittedly, hardly the most trustworthy of professionals), the signals are all over the place. Mixed as a bag of liquorice allsorts.
When it comes to house prices, the country is as divided as it is on that toxic subject called Brexit.
In the last few days, data from property website Rightmove and estate agent Your Move suggests that the housing market remains both fragmented and subdued.
According t o Rightmove, t his month has been the weakest start to a year since 2012. Average asking prices, it says, rose to just below £299,000 – 0.4 per cent higher than in the previous month and 0.4 per cent above a year ago.
‘A somewhat patchy and variable picture depending on where you are in the country,’ remarks its housing guru Miles Shipside.
Your Move paints a similar picture. Its data indicates that house prices rose 0.3 per cent in December 2018 with annual price growth the most sluggish for seven years. A flatlining market, it says.
Yet it is not all doom and gloom. Far from it. While economic uncertainty, fuelled by the Brexit factor, has certainly disrupted the London housing market – and to a lesser extent the South East – the market as a whole is far from dead.
Scratch a little underneath the headline figures and there are pockets of spring- like bloom. Parts of the country are still experiencing annual house price growth in excess of five per cent. In some regions, properties are being shifted in less than 60 days while transaction levels are ahead of last year.
Where sharp house price falls have already happened – for example, in some London boroughs – it has caused a marked pick- up in the number of people looking to bag a bargain.
This has all been helped by readily available cheap finance with rates on many fixed rate mortgages below 2.5 per cent – deals that provide financial protection well into the term of any future Labour Government. Rightmove, for example, is seeing buyers pay 4.5 million visits to its website daily, looking for homes to purchase.
‘Many people appear to be contemplating a New Year move,’ says Shipside. ‘ Home-movers have a track record of ignoring the politics and continuing to satisfy their housing needs.’
In the London borough of Richmond, where house prices have been adversely impacted by Brexit, some estate agents remain remarkably upbeat.
Elliot Rowe is sales manager at Marsh & Parsons, one of London’s premier estate agents with an office a stone’s throw from Richmond’s busy railway station. He says buyer interest in homes is 35 per cent up on the same time last year.
‘ We have been pleasantly surprised this month,’ he says. ‘There is a lot of interest in one and twobedroom apartments. People just want to get on with their lives – and are no longer waiting to see what happens with Brexit.’
Other agents are more sanguine. Richard Winckley, of Major Son & Phipps, says heavy stamp duty costs – resulting in an effective 4.4 per cent charge or £43,750 on a £1 million purchase – has stopped many people moving.
He believes some have stayed put, preferring to spend the money they would have paid in stamp duty on a home extension or loft conversion. It is a point echoed by Edward Hall, manager of estate agent John D Wood. ‘Stamp duty is proving a real killer.’
Lee Wainwright, chief executive of online estate agent Purplebricks, is convinced now is a good time to buy. He says: ‘There are some great properties out there, interest rates are making finance affordable and owning is generally cheaper than renting.’
Key market drivers, he says, are first- time buyers and new home builds where an array of tax incentives and stamp duty breaks are making home ownership more affordable.
He adds: ‘Naturally there is caution in the air but we are seeing sellers looking to trade up or relocate. The housing market is vibrant outside London, especially in the Midlands –West and East – and some Northern towns and cities.’ Your Move’s data confirms that cities such as Derby, Leicester and Nottingham have all enjoyed house price growth of more
than five per cent over the last year – with sales taking 64 days to complete ( against 80- plus days for Greater London).
A growing family and aspiration are key drivers for owners wanting to move up the property ladder – helped by keen demand from firsttimers who make attractive buyers because sellers can protect themselves against being caught in a long transaction chain. Most second-steppers are looking to expand into three or four-bedroom properties with a wishlist of a good garden, drive and garage.
Location is key, with distance to work, transport links and catchment areas for schools big considerations.
Sam Mitchell, chief executive of online estate agent Housesimple. com, says: ‘Sellers in this kind of market need to price sensibly. If you price right, there’s a buyer out there. Pent-up buyer demand has been building since December. Low interest rates and competitive mortgage deals make it an attractive market, but low stock levels in some areas have left buyers with limited choice. Sellers who market now will have their pick of buyers.’
He adds: ‘The North West and Yorkshire have good value properties on sale. Affordability is not such a problem in the North as it is in the South for families looking to upsize to a family home.’ Finally, it is still possible to track down a house for less than £20,000 – a typical pre-1980 price – in parts of Scotland and the North of England. The properties may not tick the dream home box but for a DIY enthusiast it could be the bargain they are looking for.
The cheapest property on the books of onli ne estate agent Housesimple is a one-bed flat in Port Glasgow with a selling price of just £4,000.