Luxury Property Market Outlook | J.P. Morgan


[gentle music] Sarah-Jane: It really is
an interesting time in the property
space at the moment. UK prime real estate looks
like it’s holding some relative value, the Swiss market
holds its safe haven status, and the French market looks like
it’s making a quiet comeback. I met with three specialists
today to talk about this in greater detail,
and I asked them: Who is buying, what
are they buying, and what’s the medium- to longer-
term outlook for their markets? So Alex, let’s
start with you, how has the demographic changed
for the Swiss property market? Alex: Do you know, I think
about 10 years ago when I started working
in this market, people came to us
initially on a tax move. They were looking for
preferential tax arrangements, which the Swiss offer. But actually, nowadays I think
that’s changed with people now looking for safety and security
in particular for their family, for their assets,
for their investment. And in the French-speaking
part of Switzerland, we have a huge number of
options for education. Sarah-Jane: And what
kinds of property are in demand right now? Alex: I think like
most areas, actually, the sort of historical property
that’s been renovated is sort of the ultimate dream. But essentially, people
are looking to buy sort of contemporary architecture, taking advantage
of the full views. And because the Swiss are very
good at constructing new product which is very ecological,
very economically considered, people are more open-minded
towards those as well. Sarah-Jane: And how are the
headwinds of the market today impacting the medium-
to longer-term outlook for property in Switzerland? Alex: My only real concern,
I think, is- going back to that
safe haven status- is the area of the currency. The Swiss franc is somewhere
where a lot of our clients are looking to invest and put
money into that currency. And I think if the currency
becomes too strong, it could have a detrimental
effect on the market. Generally speaking
though, the Swiss market, we’ve seen in particular
the last quarter, in Geneva where more and more
transactions are beginning to take place in that 8 to
15 million price range, which hasn’t happened
for some time. So clearly, you can see that
that confidence is returning, and if you look towards
the mountain market, actually we’ve had a
particularly strong season in Villars and Verbier, so
actually, generally speaking, I’m busier in the Swiss market
than I’ve been for some time. So it’s looking very rosy. Sarah-Jane: Rory, how
has the demographic of the buyer changed? What are they buying? And how are the headwinds
for the UK market impacting the medium-
to longer-term outlook? Rory: It’s been really
interesting looking at the changing buyer profile. If you look at prime London,
for example, at the moment, 70% of our buyers, over 10
million, are from overseas. Between 10 and 20, for example,
40% of the buyers are British, 17% are from the Middle East,
and 17% are from Russia. If you go over 20 million,
between 20 and 30, 22% of our buyers are from the
U.S., strong currency play, and 22% are from Europe,
European buyers being particularly interested
in family houses. Over 30 million, 31% of our
buyers are from the U.S., and 17% are from China. So strong international
presence across the board in both apartments and houses. In terms of what they’re buying,
we’ve seen new demand coming through for
lateral apartments, particularly lateral apartments in new-build schemes with a full suite of services such as swimming pools and
concierge and parking. At the other end
of the spectrum, low-build family houses in
core family markets like Chelsea and Notting Hill with
proximity to good schools, good private
schools, good parks, and possibly a big
garden at the back. In terms of headwinds, the
market’s been held back by notable headwinds in
the last few years. The peak of the market was 2014. Since then, we’ve
had an increase in stamp duty taxes,
property taxes. We’ve had political uncertainty
with the obvious Brexit. That’s held back buyers. Sentiment has been down. We are seeing some of those
fears subsiding in the market. So if the peak from a volume
perspective in London was 2014, we think the low
point may be 2018. So we see some buyers seeing
this as a buy opportunity, spotting real value
in the market. Chelsea, for example, is
down 20% from the peak. And we expect it to be one of the best-performing
markets in 2019. So we see a real opportunity
for the well-advised buyer. Sarah-Jane: Mark, how
has the demographic of the French buyer changed? What are they buying, and what’s the medium- to longer-term outlook for the property market, including how the headwinds
are impacting that? Mark: Over the last
10 years, I would say, the demographic of
buyer for Paris has changed quite dramatically. Firstly, by the age group,
which has actually dropped significantly from probably
late 50s to sort of late 40s. The second point I would make is
that 40% of prime buyers today are actually French, which
is an incredible change, of which 20% would be domestic
and 20% would be the expat community returning from Asia
and Northern Europe, et cetera. What they’re looking
for typically is a historic building,
Haussmann or earlier, traditional proportions,
lovely facades, no vis-à-vis, i.e., good views, south, southwest orientation, prices 2 to 5 million
traditionally. In terms of headwinds, apart
from the usual sort of hazards we face in Europe, Paris
is looking pretty rosy. Prices have escalated
quite quickly in Paris in the last two years,
probably 15%. So there may be a little bit
of a sort of pause for breath, but I would say with
interest rates low, values still attractive, and
an expected 25% increase in ultra-high-net-worth
individuals in Paris, I think Paris
residential is probably a good investment right now. Sarah-Jane: I hope you enjoyed
the insights we heard today. If you have any questions, please contact your
J.P.Morgan advisor.

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