From his rural retreat and against the background hum of a garden strimmer, Phil Spencer is in expansive mood as the conversation opens with a question about his working week, explaining that for him no two weeks are the same.
There’s a great deal of variety involved in life as a television presenter—which is one of the pleasures, as well as one of the pains! I do love the variety but it also causes a fair bit of time on diary management and shuffling things around. It depends on what I’m filming at the time.
This year’s been particularly busy and this half of the year has been my busiest ever because I’ve been working on three different series—we’ve been finishing a series of Location, Location, Location, we’ve started a series of Love It or List It (where myself and Kirstie Allsopp go head to head as we battle it out to convince homeowners to either sell their home or refurbish it), and I’m also into a new series called Stately Homemaking.
Phil’s new TV series
Phil explains that Stately Homemaking is a Channel 4 new 6-part heritage property series that will go on air in the spring of 2016. The series takes Phil on a grand tour of our country’s most extravagant country houses to explore why and how they were built.
It’s been an absolute pleasure and a privilege to make this series. We’ve chosen six of the very best family homes in the country, including Holkham Hall and Woburn Abbey. I’ve been meeting the owners of the houses and hearing from them about how and when their houses were built, what were the challenges of building, where did the money come from, and so on … we walk around these great houses and estates, looking at the architecture and the family collections, and we try to put into context these great wealthy houses and why they exist, compared to other houses. It’s been fascinating and I’ve learned a huge amount.
Property investment, 2016
It was two years ago that Phil commented ‘There is only one way house prices can travel in the decades ahead, which is why I believe it is good news to invest in property.’ Does he still believe that buying a property in 2016 is going to be a good investment—will values continue to increase?
Yes, I still think this is true, in the long term. We all need to live somewhere and I firmly believe that we are better served paying down our own mortgage (owning a property), than paying rent that pays off someone else’s mortgage.
I’m sure I’ve said before that this is an island with an increasing population, we leave home earlier, we get married later, and we live longer. Add immigration into that little melting pot—plus the fact that we don’t build enough homes—and you’ve got an increasing level of demand for a relatively finite supply of property. So, in the long term, I do believe prices will rise and will exceed inflation. It doesn’t necessarily mean that prices will rise every year but over the long term they will.
Luxury property trends
There are also forecasts that conflict, especially in the context of price trends in the luxury property market where, for example, Savills predicts a 20% increase over five years but John Taylor predicts a market collapse. Who’s got it right?
We had massive changes to stamp duty back end of 2014; this was good news for the vast majority but very bad news for people who were interested in the top end of the market. The effects of those changes are still impacting that market quite a lot. It is a fact that, having made those changes, the government is collecting less total stamp duty revenue, as a result of those changes, because fewer people at the top are moving homes—paying 12% of value on a very expensive house is just a phenomenal number and that is still affecting people. It’s kind of economics versus politics (and I’m not political) but economically the changes that were made at the top end don’t make sense because the government is now collecting less revenue. Can I see a day when the government will reduce the tax on the rich [laughs] … I can’t see it happening. But, actually, it would be better news for the treasury if they did.
The market at the luxury end is hugely dominated by international buyers. And I do believe that, no matter where you live in the world, and if you’re a very rich person, the chances are that you will want to buy a property in England—Britain is good news for all sorts of reasons. I don’t see that changing although there is talk of changing the tax regime for those particular international buyers—and that would certainly frighten them off.
Savills forecast—20% increase over five years, 4% a year—I would say that’s perfectly achievable under the current circumstances. But if the tax levy on international buyers were to be seriously increased, then, as John Taylor predicts, the market would probably implode. But I’d say, in the current scenario, Savills have got it right. So, risk: quite low.
The self-build trend
A quite different sector of the property market sees the rise and rise of self-build projects. Are we likely to see this as a continuing and growing trend?
A recent survey showed that over half the respondents were interested in self-build, and I think many of us dream of building our own homes. Obviously there are pitfalls to be aware of because if it were easy everyone would do it.
However, the self-build sector is the largest house-building sector—it’s something like10% of houses built every year are built by individuals rather by the major house builders. I don’t think there’s a corporate house builder that builds 10% of the total. So it’s a very important sector. It’s not straight forward, but there are lots of associations out there that can help you—there the NaCSBA (National Custom & Self Build Association)—and the government is doing everything possible to help.
My tip to those with self-build in mind is first to choose the right architect and builder, then, you must have the right finance in place (self-build mortgages are out there) but finance is just another of the challenges you’ll face.
The other question is how involved, personally, do you want to be in your self-build project. Do you want to be very hands-on or will you hand it over to a contractor? And, yes, self-build is a good investment—because it’s cheaper to build than it is to renovate.
Buy-to-let, new regulations
Another sector of the property market that, for several different reasons, has seen a strong increase in demand is the buy-to-let sector. Does Phil see good prospects continuing in 2016?
Buy-to–let, that’s an interesting one because there have been some recent changes—there are some tax changes that are being phased in. These tax changes will be completely phased in by 2020 with the result that the government is aiming to reduce the ability to gear-up in your property investment.
Gearing-up has been one of the joys of property investment in the past has been—if you have £1,000 to invest in the stock market, you’ve invested £1,000, if you have £1,000 and it allows you to borrow £10,000 to buy a house, you’ve geared-up, and therefore with a much smaller deposit you can benefit—and indeed lose, from swings in the market.
However, following the Chancellor’s Autumn Statement, the government will be clamping down on purchases of buy-to-let and holiday properties with the aim of tackling the growing problem of homeownership where we see a significant decrease today of people under thirty-five who own their own home. The move is intended to address this, partly, by making buy-to-let less attractive, meaning that anyone buying any kind of property alongside their main home will pay a 3 percent premium after April 2016.
The jury is still out on these changes, but my expectation is that buy-to-let may still make sense for investors who are more motivated by long-term capital gains rather than initial rental yields. But, as always, anyone contemplating a buy-to-let investment should make sure they are completely up to speed with these latest developments before taking the plunge.
We’ve also had something called the Deregulation Act 2015 which produces a lot more legislation for a landlord in terms of tenant safety, gas, electric and fire safety, deposit schemes, the length of tenancies and what happens at the end of it. So, there’s a lot more paperwork and more hoops to jump through—all of them in favour of the tenant. For these reasons, buy-to-let is becoming a more complex business. So, my advice to the non-professional landlord would be to use a professional managing agent.
Is it a good time to invest? Well, I’m sure there will be plenty of tenants but there could possibly be fewer landlords—because some landlords may decide not to buy because of these tax changes, and some landlords may decide to sell—so if you have fewer landlords but more tenants, you might end up with increased yields, So on the one hand you could say it’s a good time to be getting into the buy-to-let market but at the same time there are some risks out there: nobody likes change, and there are some changes. But, arguably, where there is risk, there are greater rewards. And I think there is a risk at the moment, simply because of the unknowns.
If your home project or investment project for 2016 is going to be a property refurbishment, working to a tight budget, does Phil advise employing a firm of builders who will ‘do it all’, or would it be more cost effective to employ skilled tradesmen for each specific job?
It is going to be more cost effective to do the latter. But I always think it’s a question of time versus cash and which do you value higher. If you have plenty of time and not much cash, you’d be much better served managing the project yourself because you will get it done cheaper. But if you have limited time and some spare cash you might be better off getting someone else to do it. But it also comes down to your expertise and how experienced you are. But it you employ separate tradesmen, you have to know what you’re doing and how to manage it—because if you don’t, you’ll get tied up in knots! Personally, I’m a fan of the single contractor—you’ve got one relationship to manage, one person to pay.
For those starting out in today’s climate of high property prices and relatively modest wages, the route to becoming a first-time homeowner seems tougher than ever …
The route to buying a property has never been easy … buying your first house, that’s never been easy. The generation above mine saved hard for years—they didn’t go on holiday every year and they didn’t go out to dinner every week and they didn’t have Sky TV, etc.—it was a proper sacrifice you were making if you were going to get married and buy your first home … you had to save up the deposit. I don’t think people starting out today are prepared to make that sacrifice, we’re not accustomed today to waiting for things, if we want it, we want it now—we don’t even stand in a queue any more! And it’s a fact that the majority of first-time buyers have the Bank of Mum & Dad to help nowadays.
But I always encourage people to buy a home, it’s not a forever home, it’s your first home. Try and get on the ladder, by hook or by crook, and start paying your mortgage down.
Energy and energy saving
For more than twenty years we’ve seen a growing trend to develop renewable energy along with energy saving. The sector perhaps most influenced by this trend is the building industry. The Passivhaus Standard is one example (see also pp.00). Does Phil believe that these energy efficient trends will soon become the norm rather than a trend?
Passivhaus is very interesting—fastest growing energy performance standard in the world, 30,000 buildings to date, aiming to minimise the heating demand.
I’m going to offer you an example, and I haven’t spoken about my personal move to anyone else, but I now live in a house that I think is carbon-neutral.
The previous owner installed a ground-source heat pump in the garden and solar panels on the roof, so it generates more power than it uses—so the house actually makes a profit at the end of the year! It’s incredibly well insulated, it’s incredibly warm, and it’s not costing us anything. In new-builds all this is not so much a trend, it’s an obligation, although new-builds do make up a fairly small proportion of our greater housing stock. But energy-efficient homes are clearly the way forward for all of us.