The LCN Property Interview: Jeremy McGivern

Jeremy McGivern talks to LCN Property about his specialism (prime property in central London), how to invest in that market successfully, and the importance of establishing your own knowledge base and thinking critically rather than simply following the prevailing view.

Jeremy McGivern is the founder and managing director of Mercury Homesearch, who specialise in prime property in central London. He is also the author of the book ‘The Insider’s Guide To Acquiring £1m-£100m Luxury Property In London’.

How did you get into property?

I acquired my first property back in 1996 when my father very kindly gave me and my brother some money to buy a first home. Obviously, being young, I was doing triple summersaults that I could buy a house in London, and didn’t really notice how the market is rigged and the way it works. Then I bought my brother out of the house, did it up, sold it on, did very well out of that.

I was bored of what I was doing, so I started looking for another property. The second time around I was more savvy, and realised that the service and advice I was getting from the estate agents was shocking. But then, of course, they’re legally obliged to get the highest price possible for the seller. As a buyer, you are just not their responsibility or their focus.

I found a property, did it up, sold it on, did that a couple more times, and then thought that there’s got to be a better way for buyers to acquire property, especially at the top end in London. Hence I founded Mercury Homesearch in 2001.

 

‘Rigged’ is a strong word…

It is rigged, if you think about it. Almost all the properties come through the estate agents, and the estate agents, as I said, are legally obliged to get the highest price possible. Their goal is not to find the buyer their ideal home or investment. (And buyers, by the way, are referred to as ‘applicants’ by the estate agents, which gives you an idea of the sort of service and experience you’re going to enjoy.) Their role is not to find your ideal home, but to sell any one of their clients’ properties to any one of the applicants they happen to have registered with them.

Which is why people get so frustrated: they probably get something that isn’t even remotely close to what they want. And that’s because it is all rigged against the buyer. And then, of course, when it comes to negotiation, why are you taking advice from someone who is very openly trying to get the highest price possible for the seller?

And then there are all sorts of other issues about just getting information. Most of what you read in the press is information that is provided by the estate agents. And when it comes to valuations, estate agents legally aren’t allowed to lie, but – as we all know – statistics can be made to tell any story you want.

So from start to finish, it’s a bit of a nightmare for buyers. By the way, this isn’t a diatribe against estate agents, because the good estate agents are very good at what they do, which is why we don’t sell property. But there are too many estate agents, in my opinion. (There are also too many buying agents, to be honest.)

The agents have a particular job they have to do. And because people forget that, estate agents are, as I’m sure you’re aware, a permanent fixture in the top ten least liked professions in Britain.

 

What is Mercury Homesearch’s market: what is the lower bound of your price band?

Well, we tend to start at £1 million. But everything we do is bespoke, and we have acquired properties for our clients that cost much less than that, where we think we can help and add value. The majority of what we do is probably between two and ten million, because that’s where the majority of the liquidity is, but we also acquire significantly bigger properties.

 

How does that end of the market vary from, say, the £250,000 property market?

It’s different in terms of the competition you’re up against. There are obviously more properties at the £250,000 mark than there are at twenty-five million, so at the lower end it’s more commoditised and you have more choice. You don’t necessarily need to move as quickly, although there are always properties that will outperform others – in every area and price range – and whenever you find one of those you always need to move swiftly.

The other thing is that at the top end of the market, especially when confidence is high, there’s far more price elasticity. So at almost any stage of the property market, you’ll read reports that the market is too high, prices have gone mad, they’re about to fall… and then five years later they’re much, much higher. The crash hasn’t happened. And the reason for that is that there is an astonishing amount of money out there.

Most economists focus on the house price to earnings ratio, which is actually an incredibly poor indicator of where prices will go. It is more important at the £250,000 level than the twenty-five million level or even the five million level. Because at the high level you’ve got people who are buying cash. Or if they’re using a mortgage it’s because it makes sense to do so: they’re paying maybe 2.5% for a mortgage and they think they can earn more than that with the money. There are also lots of people at five million who need a mortgage to be able to afford the property but, on the whole, there’s far more elasticity.

Also, because it’s a far more international market, you have to look at what’s happening in the rest of the world, and how that will affect the amount of money coming into London. It’s the same as any market. It’s all about the amount of cash and credit available to buyers.

 

Are the most desirable parts of London partly insulated from downturns in the wider market?

I am very bullish on property and especially London property, but I am the first to point out that it is not a bulletproof investment by any stretch of the imagination. It goes up and down. But ultimately it’s the market participants who decide that. So if you look at, say, the period from 2016 to the election in 2019, prices were only falling slowly, but transaction levels plummeted. And the reason for that is there are far fewer forced sellers in somewhere like Mayfair because they have so much money. But if someone is a forced seller – and you even get that up at the twenty to thirty million pound mark – and the market is soft, they will lose money if they bought badly or at the top of the market.

So it’s certainly not a bulletproof investment. You’ve got to be very careful. One of my bugbears is that people seem to think that very wealthy people are incredibly frivolous and don’t really care about their cash. In reality, one of the reasons why they’re so rich is that actually they really do care about it. (There are obviously exceptions to that, as there are everywhere.)

There was a very good statistic from Savills a few years ago that showed that between 2005 and 2013, the top 10% of properties increased in value by 190%. And that period includes the big financial disaster. Meanwhile, the bottom 10% of properties only increased by 63%. So there is a massive outperformance. Now, you’re not going to get the 190% increase in every area and price range. But in every area and price range, there will be properties that will outperform. And those are the ones that as a buyer you want to focus on. It doesn’t matter if it’s £250,000 or £250,000,000.

 

How does Mercury Homesearch differentiate itself and market itself to potential customers? Why do people choose you?

Several reasons. Firstly, the way I look at the market. I was never an estate agent. Lots of people who do what I do are people who simply jumped the fence. I came in from the perspective of ‘This is annoying me. This isn’t right and I want to rectify it.’ People find that refreshing.

I’m also an unbelievable bore, as you’ve probably already discovered: I’ve studied over 300 years of UK property history. I’m the only person who combines that with being on the coalface of the prime property market. Over 20 years, I’ve personally inspected over 23,000 properties, seen the details of at least 70,000 more, and have acquired hundreds of millions of pounds worth of homes and investments for the clients of Mercury Homesearch.

That combination is why I’m asked to give talks by private banks, funds, news organisations and so on: because I have a viewpoint that no one else has.

 

What are the main things that inexperienced property investors get wrong?

The first chapter in my book is called ‘The Quickest Way to Get a Price Reduction’. It should actually be called ‘Preparation’, but nobody reads a chapter called ‘Preparation’. The key thing is that both homebuyers and investors have to speak to their advisers before they even start looking at property.

They have to have their solicitors ready so they can move quickly. Speaking to their tax advisors is also absolutely essential, because the tax rules seem to be an ever-moving feast and if you get that wrong it can be incredibly expensive, especially if you’re bringing money in from offshore.

They also need to decide things like: does it make sense to put the investment in a company or to have it in your own name? It depends on what you’re trying to achieve. This is not my own expertise, which is why investors need to speak to people like LCN Property, and they need to do it in advance.

If you decide to set up a company to hold the investment, then that takes time. And then if you’re using finance as well, the finance will change if you’re using a company rather than using your own name. All this needs to be put in place.

The reason why I say it’s the easiest way to get a price reduction – not necessarily the biggest price reduction, but the easiest – is that it means you’re able to move swiftly when the really good opportunities arise. Now, that doesn’t mean you necessarily need to complete quickly, but if you can say to someone, ‘We can exchange contracts in two weeks’, or sometimes quicker, then that certainty is going to appeal to most people. Because it can drag on for months and months and months. Nothing’s legally binding until you exchange contracts, so either party can walk away with impunity before then. So if you can offer that speed, that’s really important.

Most people go about buying property like they do buying a computer or booking a holiday. It’s absolutely frightening. So just a little bit of preparation at the start, which mostly you can delegate to other people to do for you, will save you a vast amount of time and stress, and also large amounts of money as well.

Also, with property, it’s very easy to think you know more than you do. People go on websites, or they sign up with just two or three agencies. There are over 200 estate agents in prime central London, so if you’re only speaking to – being generous – ten estate agents on a regular basis, you are seeing a tiny percentage of the market.

I would say over 90% of buyers go about it in a way that will almost guarantee they won’t acquire the best property their money can buy for the lowest price possible.

 

People buying a house to live in sometimes find it hard to separate emotion from rational calculation: do you think that investors can have the same problem?

Sometimes, depending on the individual. What tends to happen is more that people have a certain particular target and then they won’t look at opportunities that are actually much better.

For example, some people say, ‘I’ve got to have a certain yield’. But the investment isn’t just yield. What is the capital gain going to be? And you get taxed less on capital gain, so that’s what you should be aiming for. The key point about property is that growth in money supply always ends up in the land market.

People forget it’s not the house per se that goes up that much in value. If you buy a house in Belgravia for £20 million, you’re insuring it for probably about £8 million. That’s the cost of the rebuild. And the cost of rebuilding property moves a bit, but on an inflation-adjusted basis it hasn’t really moved in centuries. What has moved is the value of the land. That’s what moves dramatically.

If you don’t understand that, you’re going to be focusing on things like yield, and house price to earnings ratios, and so on, which have a place, but they are not the be all and end all. People need to be aware of that. I’ve written a book on acquiring property in London. If that would be of interest to your readers, they can request a complimentary copy: just email my assistant at dee@mercuryhomesearch.com and mention LCN Property.

 

You founded Mercury Homesearch in 2001: has the internet made a big difference to the market since then?

The problem with the internet is that it gives one the impression of making everything easy. You go onto one of the sites, you put in your details and what you want, the results come up and you think, ‘Ooh, I can look at this, this and this.’ The problem is that there isn’t one website that has all the properties on it. And then as you get higher and higher, fewer and fewer of the top properties are actually on the internet. They’re sold off-market.

The highest figure I’ve seen was one agency saying that 70% of their properties were sold off-market. I’m not entirely sure I believe that! I think they were trying to get people to call them. But certainly the big agencies openly state that 30, 40, even 50% of their properties are sold off-market. And the higher up you go, the truer that tends to be.

 

What other changes have you seen in the property market over the last 20 years?

If you look at London itself, it’s changed dramatically over those years. The market hasn’t really changed that much. Obviously, there are far more international buyers in the market now than there were twenty years ago. London has always been an international market, but it’s expanding. The world is becoming a smaller place, and there are certain key cities of which London is one.

After Brexit, everyone was saying ‘It’s a disaster, 170,000 jobs will leave the City and there will be tumbleweed running through London,’ but actually about 10,000 jobs have been lost in the City. So they were 95% out on that estimation. And this is the thing about Brexit, covid and so on. Punditry goes into overdrive and all sorts of idiotic things are said, and it garners headlines.

In the Knight Frank wealth report that’s just come out, London is once again top of the world cities, with New York and Paris tied second. Warren Buffett talks about having an economic moat that allows companies to have a defence against disasters. And London is more insulated than most cities from disasters, because we have the whole package. So it’s a travel hub: you can get from London to anywhere on the planet pretty easily. (People forget London is actually a glorified holiday resort for many people, just one without sun on the whole.) A financial hub. An educational hub. We are the number one bioscience and tech hub – not just London, but also Cambridge, Oxford and so on.

So I’m bullish across the UK as a whole. But London, I think, will do especially well because of the price elasticity. People are saying, ‘Well, prices are quite high. The house price to earnings ratio is really stretched because people’s incomes are not moving at the pace of inflation. We’ve got all these things coming down the pipeline. So how can prices go higher?’ Well, people have basically been saying that since the reign of Queen Elizabeth I, let alone this Queen.

As I said earlier, economists look at the same old things and they continue to make dreadful predictions. What they don’t take into account is the amount of money in the world, and money is being generated in astonishing amounts. It’s also being magicked out of thin air by governments in astonishing amounts. And property acts in a very different way to anything else.

Take mobile phones as an example. The first mobile phone cost $30,000, it had a battery life of half an hour, it was the size of a brick, and you couldn’t call anyone because no one else had a mobile phone. Now, a mobile phone has more computing power than the computers that sent man to the moon, and it costs you a few hundred pounds. Anybody can own one.

The strange thing about property is that if it’s in the right location, you can build more and more and more of it and prices actually go up. So if you think about Mayfair and Knightsbridge – the new developments they’re building there are selling for record prices. And look at London as a whole. London is currently expanding. Are prices getting cheaper? No, because the amount of money out there grows while the amount of land available is obviously in fixed supply and only a limited number of new properties can be built.

Now, there are examples where people built properties and they turned to nothing. Ireland. America had an over-supply of property. Cities being built in Dubai, in the middle of the desert. They got hammered because you need the infrastructure to go with it. And that’s another one of London’s economic motors. As I said, we’re not a one-trick pony. We have all these things that are attractive to people, especially the wealthy.

 

If you look back at your career, what achievement are you most proud of?

Starting the company. Everything went from there. It hasn’t all been easy. 2008, 2009 was tricky. Covid wasn’t great. Immediately after the Brexit Referendum was difficult because everybody was convinced it was the end of Britain. And at the time I was saying, ‘Honestly, this is a red herring.’ But it’s the great irony of a buyer’s market. Buyers don’t buy in a buyer’s market because everybody’s too scared.

 

If you’d taken a different path, what would you be doing now?

Well, I think we can rule out super model and top athlete. So anything apart from those.

 

A politician?

Absolutely not. I can think of nothing worse. I don’t think it really matters, as long as I maintain analytical thinking and critical thought and just not kowtowing to conventional wisdom. That is one of my big issues. And I could get on a roll about how the education system in this country is manufacturing people who aren’t really fit for modern-day life. These people are just regurgitating information, much of which is rubbish. We’ve got computers to do that. The critical thought is key.

 

What do you do to relax?

Sport. I still attempt to play football. Golf. I used to play a lot of squash. I still run the occasional marathon, when I’ve forgotten how painful the last one was. And then spending time with the kids as well.

 

What is your biggest extravagance?

It drives my wife around the bend, but I have no real interest in possessions. I could move to the other side of the world within five minutes. (Obviously I’d miss my friends.) So my biggest extravagance? I don’t know. You’d have to ask my wife.

 

How would you describe yourself in three words?

Obdurate, amusing (hopefully) and reliable.

 

Who would be your ideal guests at a dinner party?

Well, you’d have to have Tom Jones. Arnold Schwarzenegger. Thierry Henry. Robert Pires – you can tell I’m an Arsenal fan. Thomas Edison and Andrew Carnegie. And, basically, any figures who have questioned the establishment and been proven right.

 

What advice would you give your younger self?

Take more risks earlier, especially during ‘bad times’ because they are never as calamitous as they first appear.

 


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