According to Phil Spencer, a good first impression is crucial when you first step inside a property. The morning I visit the property expert’s South London home, I receive an extremely warm welcome from Jessie, Phil’s dog, who bounds into the hallway to say hello while Phil makes me a cup of tea in his spacious, sun-flooded kitchen. As soon as we’re settled at the kitchen table, me with a cup of tea and Phil with a cappuccino, it’s time to talk.
So, this is the home of the Secret Agent himself!
Yes! [Laughs] Although perhaps it’s not quite so secret anymore!
Let’s talk about the British property market. How strong is it at the moment?
The fundamentals of the market are absolutely fine, and by that I mean the basic things that control the marketplace, whether it’s the economy or employment. There are a couple of things that are worrying people, including interest rates and the election next year. Interest rates will go up at some point, it’s just a question of when, and by how much. With regards to elections, house buyers don’t tend to want to make a big decision when there is uncertainty, so lots of people are likely to wait until things settle down.
Do you foresee that perhaps, after the general election in May, that more people will be buying?
Looking back at previous elections, that’s exactly what’s happened. In the months leading up, people are holding off. At the higher end of the market we’ve got the threat of this mansion tax. That could work the flip side—there could be many more people trying to do deals at the higher end of the market before the election just in case mansion tax does go ahead.
That’s an interesting point. What can you foresee for property prices in the long term?
My opinion is that over time property prices can only increase. So long as people can borrow enough money to pay for a home, prices will rise. This is an island with a massively increasing population. Add into that immigration, the fact that people leave home earlier, they get married later, they divorce more often, and they live longer. Put all of that into a melting pot, and couple in the fact that we’re not building enough houses. In my opinion, there’s only one way the market can go—and it’s up.
There was a lot of heat in the London property market earlier this year, and even talk of a bubble.
The word ‘bubble’ is frightening, because it alludes to the fact that a bubble eventually bursts. Having said that, it’s true the market in some areas has felt very frothy this year and it certainly won’t continue inflating at the same rate in the future. But I don’t believe anything will burst! Earlier this year, there was the greatest differential between London house prices and country house prices. London was going through the roof, and it made the country market within commuter belts actually look really affordable, so people started to sell up in London at big money and move out an hour. Now, London is pretty static and the commuter belts are rising—it’s a natural movement of the market.
Because the market in London was so frantic when we were filming the new series of Location, Location, Location earlier this year, but then all of a sudden there wasn’t as much activity, people would immediately worry and say, ‘Oh my God—it really is the end of the world! It’s completely caput and we’re all stuffed!’ Actually, it’s just a seasonal change, and it needed to happen. The market was far too crazy. I’ve been following the market for 20 years, and we’re in reasonable shape right now, in fact I’d go as far as saying its perfectly healthy. We’ve talked about the long term health of the housing market, and I firmly believe in that.
With the property market in good shape, would you say it’s getting easier for first-time buyers to get onto the property ladder than it was five years ago?
It’s certainly easier, but that doesn’t mean it’s easy. Five years ago takes us back to 2009 when it was virtually impossible for first time buyers. What is particularly difficult nowadays is getting enough money together to fund the deposit, this is basically because rents have risen which makes it harder to save. However, five years ago we didn’t have the governments Help to Buy scheme, which has been really good. There were two schemes—one was just new builds, then it rolled out to first-time buyers for up to half a million pounds.
It’s a great scheme—and I know it’s helped several of my friends to climb onto the ladder. If you were looking to buy a property, where would be your first port of call for information on the market, mortgages etc.?
Zoopla is a one-stop-shop for an awful lot of information, hints, tips and guidance. It’s not just about looking for a property—there is a huge amount of information on there. It’s not just about how to find a nice two-bedroom flat, but how to value it and market trends. It’s got mortgage calculators, transport routes, maps and market movements.
Let’s talk about property investment. Do you have any specific advice for those looking to invest in property?
There’s a kind of herd mentality that goes with these decisions: ‘What’s everybody else doing? I will go and do that.’ But it’s not necessarily the right approach. Warren Buffet, a famous American stock market investor, said that if everyone else is doing it then you’ve missed your opportunity. Most investors buy two-bedroom flats, and the thought process is that it can rent to singles, couples and sharers—and that does make sense. However, my own approach is that if most investors in one particular area are doing that, then that’s probably not the one that I’m going to buy…
Today’s market is tough. Is it still worth trying to buy a property, or should you just rent?
I genuinely believe in the long term health of the British property market. I think it’s far better to be paying off your own mortgage rather than paying rent and paying off someone else’s mortgage. It will take you 25 years, but you will get there. Rent is just dead money—you’re paying off someone else’s mortgage and they’re going to have a nice pension and retirement fund. It also gives you control and ownership—you can come home one day and decide to paint the wall pink, or put a new bathroom in.
[At this point, Phil laughs warmly and tells me not to look so depressed, as I consider my own struggle to get onto the property ladder…]
Moving onwards and upwards… Is it better to invest in a property that you can develop in the future?
I always encourage people to look for properties where they can add value, because you want to try and outperform whatever the overall markets doing at the time. Remember, house prices are all relative. So just because yours has gone up by £25,000—if the one you might want to buy has also gone up by £25,000 then it doesn’t really mean anything. Unless you’re selling up and moving abroad or something—then it’s all ‘paper money’. You want to try and outperform the market—that’s when you’re doing well. That’s when it will help you fund the equity for your next move. There are various different ways of outperforming a housing market: Buy in an area that changes during the time you live there, buy a property that you can improve internally, or buy a property that you can increase the size of. Remember—it’s always more cost effective to build extra space yourself than it is to buy it already done. If you can find a property that combines all three of these elements—then you should really be outperforming the market.
Bear in mind that if you do want to do the work and make a property bigger it often also allows you to live in the property for longer. Given the costs of moving nowadays, whether you’re paying an agents fee or stamp duty, the process is very expensive and you’ve got to pay those fees in cash. I’ve always looked at housing like a game of snakes and ladders—you start in your first house at the bottom rung as a first time buyer and you finish at the top in your last house. The person who wins at snakes and ladders is the person who throws the dice the fewest times, and that’s pretty much the same as in the property ladder.
So playing the property market is really like playing a game. Have the rules changed since you bought your first flat?
It was a completely different world. I bought a very large four-bedroom flat with two reception rooms for £160,000. I got planning permission to convert it into two flats and then sold one of them, which was effectively half of what I’d bought, nine months later for £165,000. I lived in the other flat for five years, and then sold it for £380,000. That deal enabled me to take two steps up the ladder at that stage and buy my own house.
I know you’ve been really busy filming the latest series of Location, Location, Location. Did you face any unusual challenges this time?
Actually, we did, because we filmed a lot in the southeast and more in London than ever before. It just turned out this series we had a greater proportion of people looking in London. It threw out some very tough situations from a research point of view because the market was so fluid. When we found somewhere we wanted to film showing our buyers in a few days time—the chances were high that loads of other people would have seen it and there would be other offers already on the table. Things were moving so fast. That was, I think, perhaps an explanation of why there were so many more house hunters wanting our help in London. After all, if you’ve got a job, how can you dedicate all the necessary time and energy to house hunting?
Will viewers see the struggle to find properties reflected in your show?
Yes, absolutely. We have a basic format, but one of the fun things about working on the show is that it’s not scripted. I like to think that that’s some of the fun of watching it as well, because no one knows what’s going to happen. We don’t know if someone’s going to turn up and say, ‘I love it! I want to buy it right now!’ on the first property, on the first morning. Kirsty and I will be saying, ‘Yes! Brilliant!’ but the producers are saying ‘We’ve got a show to make!’ Or they might say—‘I hate it, I’m not even going inside’. These things do happen sometimes and it all makes the edited show!
It must be frustrating when you’re mediating between buyers who can’t agree on a property. How do you cope with this?
That’s the bit I really enjoy—the discussion about what’s right, what’s wrong, why and where we’re going to go from there. Of course it’s frustrating if you think you’ve found the best thing out there that is right for them, and they don’t see it that way, but it’s their money and their decision—they’ve come to us for help, and we’ve tried to help them.
You close a lot of deals for house hunters on the show—that must feel great.
The show has a reputation, which is why the people that get on the show are keen to buy and able to buy. We do deals, and agents and house owners watch that. Of the last 11 shows, I’ve made nine offers and agreed eight deals. The series before I had 10 out of 10! That’s why people come on the show, so if we can help them, I can come home at the end of the day and know that I’ve made a difference.
SEE ALSO:
Location, Location, Location: The UK’s Property Hotspots
The Great Value of Extra Space
