London property market may be in for capital punishment

Nick Payne

Regions like the North West are a “safe bet” for property developers and investors as tighter mortgage regulation means the London property market is likely to hit the buffers.

This is according to Nikal managing director Nick Payne, who delivered an entertaining talk on the activities of his company at the latest property lunch hosted by at the Restaurant Bar & Grill in central Manchester, sponsored by law firm Freeths.

Payne has been involved in the property industry for nearly three decades and through Nikal is responsible for a significant development pipeline.

He qualified as a chartered surveyor and worked for Christie & Co in London before returning north in the late 90s to realise his development ambitions.

Since returning to the North West, he has been at the heart of Manchester’s reinvention as “the original modern city”, first as a founder director of Westport Developments – where he steered the regeneration of Deansgate Locks before co-founding Nikal in 2003 with business partner, Alan Murphy.

A further £300m of build-to-rent developments are progressing through planning. Closer to home, Nikal is a powerful force fuelling the renaissance of Salford with Soapworks and the affluent modern market town Altrincham with Altair.

Altair is a new £70m, 4.5-acre neighbourhood on a prime brownfield site in Altrincham town centre offering apartments, leisure retail space, Grade A office accommodation, a new leisure centre and the largest public outdoor space to be built in the town in recent years.

Payne told his audience of more than 70 professionals the way ahead in the near future would be influenced by higher interest rates and the ongoing Brexit negotiations as well as conflicts around the world.

But he went on: “We see the regions as a safe bet at the moment. We’re talking about £300 to £400 per square foot, which we see as great value. A Saudi buying in Mayfair would carpet his house at that price.

“I think there will be a stabilisation. We know London is coming off. Prices are predicted to fall by as much as 3.2% this year in some areas of the city.

“There have been 1.2 million house transactions each year for the last four years and that’s probably going to stay the same this year, so there’s still lots of activity, probably driven by Government initiatives.

“While the residential market will remain robust, there is not enough investment stock. And there is an appetite for offices and industrial among the pension companies.”
But he said: “One area where the property sector is really struggling is mortgage regulation which is becoming very tight.

“In London, they’ve hit the regulation buffer. That’s where people can’t afford to buy houses at £2m, £3m, £4m, or £5m because they can’t get mortgages, unless they’re earning £1m a year.

“So, in London there is a lot of pressure and (prices) will probably come down.”

Payne added that the culture at the Manchester-based company is one where “we like a lot of humour”.

“There’s a lot of jest and banter in the office,” he said. “And we try to adopt the approach of two ears, one mouth – use them in that proportion. We’ve found that a very good adage.”

He also revealed he recently took on a business mentor, who is “trying to get me to use me heart and gut feeling a lot more than my head”.

“In business we use our head, but actually, we should go with the heart and recalibrate with the head,” he added.

Pictures from the event are below

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