The Home Stretch: What next for the property market and house prices?

Susannah Streeter: Hello and welcome to Switch Your Money On from Hargreaves Lansdown. I'm Susannah Streeter, I'm the Senior Investment and Markets Analyst here at Hargreaves Lansdown and as usual I'm with Sarah Coles, our Senior Personal Finance Analyst. Hi Sarah. So, we're looking at the property market this week and I know prices have gone through the roof here in Bristol, but you live by the sea. How are things shaping up there?

Sarah Coles: Well, things are pretty hectic here too as well actually in the local market, because it seems like at the moment everybody wants to live by the sea and it's also the smallish town where every time a property goes on the market, all of the neighbours just hit the website straight away to have a good look around the house. So, we discovered recently that the neighbours two doors down have put in this really gorgeous kitchen.

Susannah Streeter: I'm sure if the quiz was on the details of your neighbours' houses, you would be smashing it, Sarah.

Sarah Coles: Absolutely. Unfortunately for me, we will be taking a broader view in the podcast this week. So, we're looking at the housing market in all its glory, that's from the double digit growth we've seen over the past year to some of the early signs of some of the heat coming out of the market and what that means for estate agents, house builders and lenders, in an episode we're calling The Home Stretch.

Susannah Streeter: Yes we're really on theme this week and we'll be talking to Guy Harrington, Chief Executive of the challenger lender Glenhawk. So, Guy, I imagine interest rate rises really have changed the picture for you somewhat?

Guy Harrington: Yes. It's been quite a bizarre few months, I suppose. We've had so many headwinds coming out of COVID and so much uncertainty, only to be whacked with the cost of living and the Ukraine situation as well. So, my job has been made a lot harder over the last few months.

Susannah Streeter: Yes. A really interesting time in all corners of the sector.

Sarah Coles: We'll also be chatting with Sophie Lund-Yates, our Lead Equity Analyst at Hargreaves Lansdown, who can give us the low-down on quoted companies in the sector, including Rightmove, Barratt Developments and British Land.

Sophie Lund-Yates: Yes. Lots of ways to look at the property market, and I'm looking forward to sharing my thoughts a bit later.

Susannah Streeter: Plus we'll catch up with Emma Wall, our Head of Investment Analysis and Research, who has been speaking to Hugo Machin, Co-Head of Global Real Estate Securities at Schroders Asset Management. We will of course have the quiz and we'll be delving into some of the more unusual aspects of the property market, although sadly not Sarah's next door neighbour's kitchen.

Sarah Coles: Well, I was hoping that the odd wallpaper choice of the woman who lived over the road was going to be your first question. Oh I'll just have to gen up while we're doing this interview.

Susannah Streeter: Who knows, Sarah? Maybe it will come up. Anyway, before we go there to wallpaper and kitchens, let's take a broader snapshot of the market. It's seen an incredible period of growth. The most recent House Price Index from the Office for National Statistics showed prices were up more than 12% in the year to April and while that's down from more than 13% in June last year, it's still a really impressive pace of growth. Average prices have hit a record £281,000, demand boomed during the pandemic and in April, sales hit an eye-watering 200,000 properties a month, but the market's been coming under increasing pressure.

Sarah Coles: Yes. A huge part of the problem is this wider inflation, which means buyers are going to find their monthly budgets stretched and it does make bigger mortgages start to look like a step too far. So, with the price of everything from fuel to food on the march, they'll be thinking twice as to whether now really is the best possible time for more borrowing. Plus of course, there's the fact we've had five Bank of England interest rate rises in six months. Now, almost three quarters of mortgage holders are protected from these by a fixed-rate deal, so the rises will take a while to filter through, but when their mortgage expires, they're likely to be in for a really nasty shock. Meanwhile for the 1.1 million people on a standard variable rate, and the 850,000 with a tracker, it's going to hurt immediately, and for anyone looking for a mortgage on a new property, rates are going to be higher.

Susannah Streeter: It's unlikely that these rises will be over anytime soon, given that inflation is expected to soar to 11%. It's feared the Bank of England is still going to be seriously behind the curve in attempts to bring it down. There's dissent around the table at the Bank of England through the nine people charged with setting rates wanted to see a steeper 0.5% rise, and the market is now pricing in a rise to around 3.6% in August 2023 and while this may be a bit punchy, it's a strong indication of the direction of travel. House prices have been holding up, but we have some signs that the market is shifting.

Sarah Coles: Yes. The Halifax House Price Index for May showed a second consecutive month of slowing price rises, meanwhile in April, the Bank of England reported lower levels of mortgage approvals for the coming months and that's dropped below pre-pandemic levels and meanwhile sellers, who have been pricing their homes optimistically for more rises, are having to accept reality and more of them are cutting their asking price. So, Zoopla's May report found that more than one in twenty had cut the asking price and that's at a level of discounting we haven't seen for about eighteen months. So, prices are still rising and the annual rate is still incredibly high, but we're definitely seeing the market begin to cool as buyers start to worry about the future. Now, one interesting sign is that landlords are leaving the market. So, they've been cashing in as rising costs and a tougher regime persuade them that there are easier and more profitable ways to make money, and so they're convinced that now is a good time to sell. Of course, there's a huge difference between a cooling of demand and price falls and as yet there's no widespread conviction that prices will actually drop. One of the things that's really helping hold them up is the sky high rental prices. They're propelling demand from new buyers. So, right now if you're saving for your first property, your rent will have gone up 11% in a year and so the pressure to buy and get out of this market is at a fourteen-year high.

Susannah Streeter: Of course as well, Sarah, another major driver in the market during the pandemic was the so-called Race For Space, where buyers realised the value of having more space both indoors, so there was somewhere to work from home, but also outside and we really saw a move from the centre of cities to suburbs and further afield. The ability to work from home at least some of the time has really shifted patterns of demand, and this in turn has had a real impact on the demand for commercial property. Footfall in town and city centres fell off a cliff during the pandemic as retailers were forced to close for months at a time of course and working from home orders were imposed. For many areas, it really has been an uneven recovery, with the hybrid working trend keeping footfall down on pre-pandemic trends and the number of new office lease agreements weak. Some appear to be making significant cutbacks on their space requirements with some small organisations reducing their office space requirements by as much as 50%. Demand for the more premium space remains stronger however, with plusher offices being designed to lure back workers for meetings. However, the pandemic induced e-commerce boom has seen demand for industrial and logistical property surge. Although online sales have fallen back a little compared to periods of lockdowns, they have rebased at a higher level compared to 2019 and it's forecast that as much as 200 million square metres of additional e-commerce dedicated logistics space will be required globally over the next five years to support the growth in Internet sales.

Sarah Coles: So, it's been a couple of years of real highs and lows right across the property market. So, let's speak to someone who has seen the roller-coaster ride of the residential market at the sharp end, that's Guy Harrington, Chief Executive of Glenhawk. So, Guy, can you start by telling us a little bit about your business?

Guy Harrington: Yes. Thanks, Sarah. So, we are a non-bank lender and we predominantly lend to developers and small investors around the UK. So, we'll lend on anything from a quick auction purchase of a two bed flat in Peckham, all of the way to a semi-commercial scheme with apartments on the upper floors and commercial on the ground floor in, let's say, Leeds for example. These are borrowers who need access to finance very quickly and when I say quick, within a week or two weeks, to seize the opportunity, use our financing for a period of, let's say, six to seven months on average on our portfolio and then refinances out on to a term commercial mortgage with a challenger bank or high street funding. So, yes, in a nutshell we fund opportunistic developers and investors and landlords throughout the UK.

Sarah Coles: So, when the pandemic first hit, did you notice any change in that particular part of the market, or did it still hold up?

Guy Harrington: Good question. I mean, when the pandemic first hit, there was a bit of panic of course, whether estate agents were going to be allowed to stay open, whether valuers and surveyors were actually allowed to go and visit properties. However, it soon settled down and then we started to see the talk of government stimulus at the time, which personally I don't think was needed at all. It's clear now that it wasn't needed, and there was a big demand in borrowing. We saw a lot of cash in the market and a big rush to assets, which I think only until recently has started to ease off slightly, but the pandemic actually turned out to be a very good year for us. Whether it was on our regulated lending side and it was a homeowner moving from London to the Cotswolds, and we saw that race of space right there front and centre, which certainly recently has slowed down to a degree as people want to move back into cities, or have the option to, but we haven't seen the complete reversal yet. There's still an outflow to the countryside for sure.

Susannah Streeter: Interesting, Guy, you said there, a bit of a slowdown you're seeing more recently. How is this manifesting? Which areas in particular?

Guy Harrington: So, when I say slow down, our enquiries are very strong. We will always do well in markets where the banks start to ease up, they start to increase their buffers of liquidity within their groups. So, from our side enquiries are still strong, the demand is still certainly there. Last month was our record month of lending and we annualise lending at the moment at around 400 million of short-term loans of around £600,000 in size. So, from the enquiry front we're fine, but what we are seeing on the front end now is, well I suppose on the back end of the loans, more extensions and redemptions a little bit slower. I mean, that could be either they want to lock in the rate they have for a little bit longer, or they just want a bit more security and certainty over their funding for let's say for another nine months to a year, however a bridge loan isn't a long-term product. It's only a short-term strategic financing tool. So, it could be seen in two ways really, but I would like to think it's through good performance, because our loan book does perform very well, but that's probably going to reflect in a sign of more nervousness in the market that you were discussing earlier and how homeowners are feeling a bit more nervy on what's happening and what's going to happen over the next year to eighteen months.

Susannah Streeter: So, also do you think it could be that perhaps banks aren't being so forthcoming with the lending and it might be harder for your customers to transfer the lending from you onto more of a longer-term deal?

Guy Harrington: Yes. I think so and that's just natural bank retrenchment as we enter more uncertain times. Clearly banks are liquid at the moment, it's a very competitive market-space, and there's a lot of rushing towards assets in every sector where there's a real estate asset backed behind it. So, my personal view is the landlords will usually always have an exit onto the challenger banks, it's more the high street borrowers that took out cheap fixed-rate deals during COVID and when they start to expire in 2023, 2024 and rates by then are perhaps up into, like, the four on a base, that's when we'll start to see pain in the residential sector I think, but in terms of the broader market at the moment I feel we're in a period of perhaps stagnation coming up. There are still buyers that are opportunistic and thinking, 'Well, if rates are going to go up so quickly, I'm going to upsize my house now, lock in a deal for five to ten years at a decent rate and do that move.' Then, you also have people who are thinking, 'Well, actually, I don't really want to stretch myself, can't afford it and inflation is slowly evaporating money out of the pocket that you might not have seen it happening at the rates that you see in the papers.' So, the 10% inflation we can see is I think far below what it actually is. I think real world it's probably more 35% to 40% but as I say that's just my opinion.

Susannah Streeter: So, why do you think inflation, I have to ask this, is running that hot?

Guy Harrington: Why is it running that hot? Clearly, I feel it's an energy-led crisis, because of the energy inflation and that's tripping the figures as high as they are. We're a country of drivers. I was looking at some statistics the other day and something like 65% to 70% of people commute in a car, which is one of the highest in Europe. So, clearly any fuel cost rises like we've seen up to, you know, I filled up the other day and it was 202p a litre which is absolutely mad and that's up from, what was it, like, 160ish last year, 152? So, we're seeing significant inflation on the energy cost which whacks the consumers in the pocket in the UK I think harder than anywhere else and clearly once the fuel cost rises, I don't need to give anyone on this podcast or yourselves a lecture on how inflation works, but clearly that knocks on to everything else. Transport costs go up, costs of goods go up, cost of a pint of beer goes up and all proportionally as well. So, it's quite interesting times and I don't see it easing off until probably middle of next year at this rate.

Sarah Coles: You mentioned that we might be seeing, sort of, stagnation coming up in the future. Are you seeing any signs of that just yet, or is this speculation given the environment?

Guy Harrington: I'm just looking at the fundamentals and making a judgment off what I can see and the flow I can see and speaking within the market of what's happening and I suppose just applying logic to where we are and what's going to happen. Affordability is going to go down on mortgages, banks are going to get a little bit tighter, but you can't ignore the fact that we have a huge lack of housing in the UK. We're still hundreds of thousands of homes a year behind our target, so that's going to take a long time to catch up. Migration here is still extremely strong. So, if you combine that with a downward trending market, it pretty much cancels each other out. So, I think the house price growth we've had over the last few years as a homeowner is fantastic and not talking myself out of a job, but the reality is this can't continue. It's not sustainable and it worries me a little bit. I would rather we had gentle growth, gentle up-ticks and not the double digit growth that we've been seeing and of course we've seen it easing off more recently and I think in May it was one of the lowest amount of new mortgages issued since pre-COVID, but it's slightly skewed with those figures. So, yes, it's natural to see a little bit of a slowdown coming and I would rather have a bit of caution than a booming market in my own opinion. However, that might be completely unavoidable with the fundamentals we have in the UK, the lack of supply, the huge amount of liquidity and just Brits loving to own homes, which is something that I don't think will ever end.

Susannah Streeter: Yes, and particularly it's been so tough hasn't it for all of those first time-, wannabe first-time buyers with prices mounting so rapidly. Do you see that they represent a much smaller, kind of, part of your portfolio?

Guy Harrington: We're definitely away from the first-time buyers. Our main borrowers, they're already homeowners and they're moving up the chain, but no, you've got to feel for the first-time buyers, because owning a home is a magnificent thing, the first time you do it you feel great, but also I don't think we can really knock the rental market. In the UK, we still don't have a very institutionalised or professionalised rental market. In Germany and Switzerland for example, the proportion of renters is far higher than the UK and America for example, they have incredible PRS schemes and the UK is only just catching up on that and there's a lot to be said for renting. The flexibility, the affordability and the choice of amenities you get with new buildings these days. So, home-ownership is wonderful, but those that haven't bought yet I don't think they're going to miss out too much over the next few years in terms of house price inflation, that's for sure.

Sarah Coles: Just looking at the landlord side of things, one of the things that the Royal Institution of Chartered Surveyors has been talking about is that landlords are selling up. Are you noticing any sort of difference in the amount of demand you're getting from new landlords or those looking to grow their portfolio?

Guy Harrington: Yes, we have actually. It's more of a reallocation of assets. So, it might be a landlord selling a small portfolio due to the rising rates on his recent refinance on a buy-to-let portfolio facility for example, but then they're reallocating those assets into investment projects. So, they're looking and going, 'Okay. I'll buy,' for example, something the other day in Brighton, they're buying a seafront building, refurbishing it, they'll let out all the units within it and then they'll spin it on at auction, or they'll put it into a commercial sale. So, we're seeing people look more from hunting for a yield and a steady yield and what I would call a piggy bank yield where you park your money and it just churns and sits there nicely, to more speculative developments and investments where they can perhaps get fifteen to twenty-, well twenty if they're extremely lucky, on their equity. However that comes with risks as well, with the inflation in bill costs, building materials, shooting up almost every week, there's risk on both sides. So, they're in a slight quandary as to go from the frying pan into the fire. However people still love real estate and whether they're speculating or in it for the long-term yields, I don't see a huge flight out of it because in my opinion, where else can you get yields you can with the stability that you can with real estate?

Susannah Streeter: Okay, Guy. Well, thank you so much for talking to us. It's definitely a market we'll all be keeping our eye on in the months to come and lots more coming up about it as well. Let's bring in Sophie Lund-Yates, our Lead Equity Analyst here at Hargreaves Lansdown and Sophie, you've been looking at some of the listed companies affected by the property market.

Sophie Lund-Yates: So, I can't really talk about today's property market without discussing Rightmove. Estate agents can ill afford not to advertise on the site and this is where Rightmove comes into its own. It's a true lesson in pricing power. I mean, average revenue per estate agent which is known as ARPA when you're looking at their results, is running at well over £1,000. It also offers insulation from the housing market roller-coaster. Rightmove makes money from agents rather than being too bothered about how many houses are actually being sold. The bigger challenge over the long term is that the number of estate agents is falling. So, you have DIY offers from the likes of Purplebricks who are putting pressure on traditional estate agents. Rightmove is able to offset these declining agent numbers by charging more from the offices still standing, but I would say that a severe economic shock and knock-on effect for the number of estate agents would hurt Rightmove. It's Rightmove's operating model that really sets it apart and gives it resilience. I mean running a website essentially means that adding each new customer is costless, feeding into an operating margin position of 74% and that gives the group enormous flexibility. Business models simply don't get much better than this, but as I did say with the industry in a bit of a state of flux, there are some challenges to consider.

Sarah Coles: So, that's Rightmove, but what are the prospects for a house builder like Barratt Developments?

Sophie Lund-Yates: Yes, so for all the caution surrounding the housing market, the house builders aren't showing any signs of slowing just yet. Take Barratt Developments, where full-year completions are expected to be between 18,000 and 18,250, which would equate to 4% to 6% growth year on year. The group is fully forward sold for 2022 and the order book is worth £4.4 billion. That's up 18.6% on last year and comprises 15,821 homes. I'd actually been concerned about demand with the tapering of help to buy and the end of the stamp duty holiday, but Barratt is defying those expectations. Now this comes down to a fundamental attraction of the UK housing market. Currently demand is outweighing supply, which the housebuilders are, kind of, tasked with rebalancing. Now the UK is a nation absolutely obsessed with home ownership, which is working in Barratt's favour. Now, of course it won't come as much of a surprise though to hear me say that I'm nonetheless keeping a close eye on the economy. I'm not yet worried about interest rates and mortgage demand, because interest rates are still very low by historic standards, but I am looking at wider economic health which as we know is tied to what's going on with interest rates and a sharp economic downturn would hurt all of the housebuilders. A recessionary environment is not when people tend to buy the most homes.

So, Barratt is making the best of a situation, but the wider economy and rising bill cost inflation, which shouldn't be glossed over either, are some points to keep in mind when trying to map the profit profile from here. These concerns are reflected in the fact that Barratt's valuation has come under hefty pressure year to date, despite the group churning out those positive results.

Susannah Streeter: And we've mentioned commercial property briefly. So, what's your take on British Land for example?

Sophie Lund-Yates: Slightly different one to end with with British Land. So, commercial property is often the forgotten asset when we talk about the property market more generally and this is where British Land comes in, which is a REIT, R-E-I-T, which stands for Real Estate Investment Trust. British Land is a corporate landlord focused on the retail sector specifically. It's focusing on the areas of retail that are actually doing well, including out-of-town retail park estates and what's even more exciting in my view is the way the group is upping exposure to logistics. The physical space needed to store and process all of our online orders means logistics is a great space to be in. British Land is also reducing its reliance on London. What's interesting is that footfall and sales are approaching pre-pandemic levels across the retail portfolio and less uncertainty meant that the group was able to release some of the money it had previously set aside in case tenants defaulted, which provided a welcome boost to profits. Last year, British Land collected 97% of its rent, so it's well on the road to recovery. Now, I have made it this far without mentioning inflation specifically this week, but sadly it does need a shout out at this point. As consumers tighten the purse strings, we can't rule out some challenging times for British Land, or more specifically the tenants that it relies on for income. For a bit of extra context, the group is trading on a price-to-book ratio of 0.7 which means it's trading below the value of its assets and this is slightly behind the longer-term value of 0.78.

Susannah Streeter: Thanks, Sophie. I think we'll all be keeping a close eye on the market and the wider economy for the months to come. Coming up, it's the quiz with a focus, of course, in this episode on property. So, here's a teaser for you, how much was Buckingham Place valued for? Was it £465 million, £1 billion, or £3.7 billion? That valuation came just before the Jubilee. Coming up later.

Sarah Coles: Now I would like to bring in Emma Hall, our Head of Investment Research and Analysis here at Hargreaves Lansdown. She's been speaking to Hugo Machin, Co-Head of Global Real Estate Securities at Schroders Asset Management.

Emma Wall: Hi, Hugo.

Hugo Machin: Hi. How are you?

Emma Wall: I'm very well thanks, how are you?

Hugo Machin: Very well, thank you.

Emma Wall: I thought we could just kick off by talking about inflation and interest rates, because we're talking at a time where interest rates are rising, we just had another interest rate rise from the Bank of England in the UK last week. Inflation forecasts are double digit for a number of economies across the globe. This is something that has an impact on real estate investing, isn't it?

Hugo Machin: Yes, absolutely. Everything has been, sort of, very macro-driven by the rate environment really since the beginning of the year as inflation started to tick up in Q4 of last year, and clearly the impact in the listed market, which is where I spend all of my time investing, has been quite pronounced this year and for a very good reason. It's forward looking in terms of what's happening in the direct markets. So, yes, certainly rates are hugely impactful.

Emma Wall: Just really simply, that's because people will have to spend more on mortgage rates and indeed within the rental space, commercial, residential, industrial, more on rents as well, won't they?

Hugo Machin: I mean it's really two-fold. It's really the financing costs which are being driven higher and I think it's the change in the rate which has been really quite acute and that's really what's driving quite a lot of fear, I think, as far as investors are concerned. The other component to it really is higher input costs as well. If you look at the commercial property market as far as, you know, the underlying tenants are concerned, so those guys who are paying the rents, they've obviously got a higher cost base in terms of, you know, employers, materials. So, that is certainly another kind of component to it. It feels like, you know, there's, kind of, quite a strong conflation of events which are fairly challenging, I think is probably the best way of putting it.

Emma Wall: Looking then at what you invest in, I think it's really important to distinguish between listed real estate opportunities, which you look to take advantage of, and bricks and mortar funds. So, at HL we prefer within the open-end fund structure for people not to invest in bricks and mortar, we think there's a liquidity mismatch there which means basically everybody knows how difficult it is to buy and sell a house, we don't think that matches very well with the way that you can trade a fund. You do things slightly differently, don't you? You invest in listed real assets?

Hugo Machin: Yes, that's right. I mean, we would entirely agree with your view on that. So, the fund that I run has liquid investments in terms of underlying shares and it's on a global basis, so it's globally diversified. Underpinning those are the companies, you know, they actually own the physical assets, so you can trade the shares and most importantly as far as clients are concerned, is that they can they trade the units in our fund in order to be able to access the fund either to get in or to get out, which means there's no liquidity mismatch which is the case in bricks and mortar funds.

Emma Wall: Let's have a quick chat about opportunities. Taking into consideration the headwinds that we opened with, you know that less than attractive economic outlook, inflation rising, rates rising, where are you able to see investment opportunities in the universe?

Hugo Machin: The, sort of, analogy that we use, it's a bit like a ship setting sail out to sea. If you take the fund, as it were, as that ship, the way we would describe it is that the engine's in good order, it's setting out to sea and the thing that we can't control as a fund manager is really that macro piece and at the moment, the macro piece, it's a pretty, sort of, violent storm is the best way to describe it. So, we're slightly being pushed around by that, but actually if you look at what we can control which I think is the key as an investor, that's selecting companies that have strong and, sort of, resilient cash flows. So, the ability of the tenants to continue to pay and to potentially pay higher rents is a very good hedge against inflation. It just so happens that the inflationary numbers are running very high, clearly interest rates are backing up, and that's the challenge. But to dive in a little bit in terms of your question, there are very, very specific areas of the market that we have liked for a long time and we continue to like and in particular the warehousing space and all your listeners will know really the strength of e-commerce and infill e-commerce in particular. So, warehouses close to those, sort of, points of mass consumption.

The residential space in terms of residential apartments, we have quite a lot of exposure to that in the fund and we continue to see that as what we described as a non-discretionary spend. So, food and shelter are absolutely critical to what we do and so the shelter piece is something that we are keen on having exposure to in the fund and I think the third string really for us is the digital, or, sort of, e-commerce piece, what we would describe as the fifth utility. So, the fact that we're having this conversation on Zoom now and it's being recorded on an iPhone is, you know, one of many, many examples of where the broader global economy is going and so investing in data centres which is part of the, sort of, backbone to the Internet, has also proved particularly resilient. Yes, as things stand at the moment, looking at markets, they are very, very challenged by the, sort of, headline inflation numbers, that's for sure.

Emma Wall: Hugo, whereabouts in the world are you seeing the greatest opportunities? Is there anywhere that's jumping out as particularly interesting or indeed particularly challenged?

Hugo Machin: In terms of where is particularly challenged, I think from a, sort of, geo-political perspective, some of the pull-back in China over the course of last year and the knock-on effect to Hong Kong in particular is quite challenging. You can see just in the headlines in terms of multiple lockdowns, the impact that lockdowns have on the ability of anyone to, sort of, operate, trade to go through ports, shopping centres to remain open, that has proved very hard to predict and to look at and it's what we would describe as more stroke of a pen risk. Again, it's going to the point of things we can't control and as investors we tend to shy away, not surprisingly, from things that we can't control and can't really understand. It's beyond the, sort of, fundamentals of the financial markets. Turning to areas that I think we do like, we remain on a global basis positive about the digital piece. In the US in particular we remain really positive about some of the warehouse plays that we have on the West Coast. It continues to be very strong, and there are one or two areas in the UK and Europe which we quite like, but again it's really quite sector specific, the sort of sub-sector, if you like, tends to override the geography more often than not.

Emma Wall: Hugo, thank you very much.

Hugo Machin: Thank you very much indeed.

Susannah Streeter: That was Emma Wall, our Head of Investment Research and Analysis at Hargreaves Lansdown talking to Hugo Machin, Co-Head of Global Real Estate Securities at Schroders Asset Management on the 20th June 2022. Please bear in mind that these are the views of the fund manager and are not individual stock recommendations. You're listening to Switch Your Money On from Hargreaves Lansdown.

Sarah Coles: Finally, it's time for the quiz and Susannah has been delving into some of the odder corners of the property market.

Susannah Streeter: Yes, my online property browsing habit really has been paying off, Sarah. So, we're going to start at the top end shall we? For the Jubilee estate agent comparison site GetAgent.co.uk provided an estimate of the asking price of, of course, Buckingham Palace if it was put on the market today. So, Sarah, was it £465 million, £1 billion or £3.7 billion? Pounds this is.

Sarah Coles: Blimey it could be any of them, although it's quite hard to imagine any property could possibly be worth £3.7 billion. So, I'll go for the middle one, I'll say a billion.

Susannah Streeter: No, £1 billion was the price the value have put on Hampton Court Palace, £465 million was the value of Kensington Palace, but Buckingham Palace did come in at that ridiculously high £3.7 billion. So, there we go. I wonder how much more it adds if Queen is playing outside it every other weekend. Sticking with bizarrely expensive homes, one of the most expensive in the UK is a mansion in Mayfair owned by John Caldwell, founder of Phones4U, which is said to be worth £215 million and is thought to be one of the most expensive homes in the UK, apart from Buckingham Palace of course, but which of the following features was he excited to tell a celebrity magazine about at the end of last year? This is a feature in this house. Was it a massive golden ballroom, a glass car lift which lets him see his vintage cars from inside the house, or an Asian garden dining room inspired by his love of Thai food?

Sarah Coles: I've no idea. I mean I know about John Caldwell, but do you know, I don't think I picked up that particular magazine which sounds like I missed a treat. I can imagine all of these would be the kind of things you would have in a mega mansion. I will go for the car lift.

Susannah Streeter: You were right first time, because it was in fact all of them. So, I think it's only fair to give you that one. I wonder what dining room design he'd have gone for if his favourite food was egg and chips rather than Thai food, but anyway that's some food for thought. Okay. Let's travel down to the other end of the market and the smallest home in the UK, which is a fisherman's cottage at the end of a terrace of houses on Conwy quayside. It really is tiny at just over three metres high, but how wide do you think it is? Three metres, two metres or just one metre?

Sarah Coles: Well, whichever one it is that's really, bizarrely small. They must have made really, really tiny fishermen back then, but it can't be less than three metres wide. You wouldn't be able to turn around.

Susannah Streeter: You would think so but no, it is actually two metres wide. Although it may have been built for a tiny fisherman, the last person to live there in 1900 was a local fisherman called Robert Jones who was actually six foot three, so get that. Okay let's stick with the weird and wonderful. A property went on the market in May last year in Brecon. The three bedroom has was priced at just £200,000, but it was a bit of a DIY project. Down in the basement was an unusual feature, so what was it? Was it a nuclear bunker, a jail cell or an abandoned swimming pool? I know you do browse the property pages all the time, Sarah, you are our property guru, so surely you must know this one?

Sarah Coles: Again, do you know, I think I missed this one. They all do sound quite, I think you used the word unusual, I think they're all pretty unusual. Now I know there are some people who like to prepare for literally anything, so I'm going to go with a nuclear bunker.

Susannah Streeter: No, sorry, this hasn't been your day, it was a jail cell. In fact all the jail cells were still intact in what had been the town's prison. There was even an interconnecting door to the former fire station next door. The place needed a vast amount of work and given it was grade two listed, I imagine the cells needed to stay and after so long in lockdown, I do wonder how it affected demand for places where you could actually be locked down.

Sarah Coles: Yes. Do you know, if we ever get locked down again, I'm going to be keeping my fingers crossed for that mega mansion. I'm sure I have £215 million just tucked down the back of my sofa for it.

Susannah Streeter: Good luck tracking that one down, Sarah. Well that's all from us for this time, but before we go we do need to remind you that this was recorded on the 27th June 2022 and all information was correct at the time of recording.

Sarah Coles: Nothing in this podcast is personal advice, you should seek advice if you're not sure what's right for you. Investments rise and fall in value, so you could get back less than you invest. Past performance isn't a guide to the future.

Susannah Streeter: Yes. This is not advice or recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment and investors should form their own view on any proposed investment.

Sarah Coles: This hasn't been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.

Susannah Streeter: Non-independent research is not subject to FCA rules prohibiting dealing ahead of research. However HL has put controls in place including dealing restrictions, physical and information barriers, to manage potential conflicts of interest presented by such dealing.

Sarah Coles: You can see our full non-independent research disclosure on our website for more information. So, all that's left is for me to thank our guests Guy, Hugo, Sophie, Emma and our producer Elizabeth Potson.

Susannah Streeter: Thank you so much for listening, as usual. We'll be back again soon, so if you enjoyed this podcast please do let us know what you think and do subscribe wherever you get your podcasts, so you get a fresh new episode in your inbox as soon as it's ready. Goodbye.