:00:00. > :00:00.attacked passengers. `` at a railway station. I will be back at the top
:00:00. > :00:07.of the hour. Now it is time for Talking Business. London properties.
:00:08. > :00:14.English football clubs. Foreign buyers. They are flocking in despite
:00:15. > :00:20.an economy recovering from a banking crash. How attractive is buying in
:00:21. > :00:39.London? I am Linda Yueh and we are Talking Business.
:00:40. > :00:45.A warm welcome to the programme. Despite the doom and gloom, you
:00:46. > :00:49.sometimes hear about the British economy, foreign buyers are coming
:00:50. > :00:52.in for at least a couple of assets ` housing and football clubs. In
:00:53. > :00:59.London, prices have risen rapidly and doubled the UK average at about
:01:00. > :01:03.?400,000, which has raised concerns. These are some of the most expensive
:01:04. > :01:09.properties in the most desirable parts of London. The vast majority
:01:10. > :01:13.of the owners are people for whom these are second or third homes. The
:01:14. > :01:17.city is home to many different nationalities. At the influx of
:01:18. > :01:27.these cashrich buyers is having a huge impact. `` but. Other prices in
:01:28. > :01:31.England are at the peak of 2007 but in London they have doubled since
:01:32. > :01:36.2005. Figures show they are still rising by around 10% from a year
:01:37. > :01:41.ago. According to a recent survey, almost half of prime London
:01:42. > :01:46.properties worth sold for in excess of the asking price. And they sold
:01:47. > :01:51.within two weeks of being put up for sale. So, is it the night life, the
:01:52. > :01:57.restaurants of the good schools that is tempting buyers? And will that
:01:58. > :02:02.lead to a dangerous property bubble? Joining me today to discuss
:02:03. > :02:05.why foreign buyers are coming in and if there's a bubble in London
:02:06. > :02:11.housing market are Henry Pryor, housing expert who runs his own
:02:12. > :02:14.blog, The Property Expert blog. Merryn Somerset Webb is editor of
:02:15. > :02:21.Mana week to stop and Niccolo Barattieri, and develop the ``
:02:22. > :02:28.develop a larger parties in London. Merryn, is there a bubble in the
:02:29. > :02:32.London market? There is in all normal metrics, but you have to put
:02:33. > :02:36.it in the context of what is happening globally. There are low
:02:37. > :02:40.interest rates and quantitative easing in many countries and a lot
:02:41. > :02:44.of capital flight out of areas that are seeing difficulties. Is there a
:02:45. > :02:50.bubble in a normal metrics, looking at incomes? Yes, there is. Does it
:02:51. > :02:56.mean that this huge level of price rises will end soon? Probably not.
:02:57. > :03:02.Henry, do you agree? I think I do. The enquiries I am getting our
:03:03. > :03:07.people viewing London as a second currency. They want to see somewhere
:03:08. > :03:12.safe for them, as they would see it, to put their money. And the mistakes
:03:13. > :03:16.some are making is to mistake and investment for what is actually a
:03:17. > :03:20.gamble for some speculation in the London market is rife. People are
:03:21. > :03:25.forgetting about the idea of a yield for their investment and they are
:03:26. > :03:30.buying solely for capital value, which I think is dangerous. Nicolo,
:03:31. > :03:34.is there a bubble? Do you see that? I don't have a crystal ball so I
:03:35. > :03:39.don't know what the future holds. We are to concentrating on the
:03:40. > :03:41.perspective of the pound perspective. If you adjust for
:03:42. > :03:47.currency, the bubble looks different. If you look at it from
:03:48. > :03:51.some Asian currencies, the market is down since 2007. It is up in pound
:03:52. > :03:58.terms but down 15% in Singapore dollars. Like everything, it depends
:03:59. > :04:02.how you look at it. I don't know what the future holds. There are so
:04:03. > :04:10.many different macroeconomic points that can change. I don't think
:04:11. > :04:14.necessarily there is. Merryn, what about that? A lot of the buyers are
:04:15. > :04:18.foreign and they are looking at the value of the pound against what they
:04:19. > :04:23.will get in other places. In that sense, if you think the market is
:04:24. > :04:28.bubbling, would this mean that prices will continue to go up? Or is
:04:29. > :04:33.there a risk of collapse? There is obviously a risk of collapse. It
:04:34. > :04:37.depends on what happens globally. This is a macroeconomic issue. It is
:04:38. > :04:41.about global interest rates. It is about flight to safety from where
:04:42. > :04:45.capital is not safe. We know there is huge capital flight from China at
:04:46. > :04:49.the moment. You just have to look at the money coming out of Macau.
:04:50. > :04:53.Enquirer is fun places like Argentina and Brazil have gone up
:04:54. > :04:57.massively in the last few weeks, as we saw the beginning of crisis in
:04:58. > :05:02.the emerging markets. House prices in London are not about what
:05:03. > :05:05.Londoners can pay. If it was, this would be a massive bubble that would
:05:06. > :05:09.collapse any second. It is still a massive bubble, but it is driven by
:05:10. > :05:17.things outside the spirit of the average Londoner. What happens next
:05:18. > :05:24.is impossible to tell. Henry, what is going to happen next? Like any
:05:25. > :05:30.market, housing in London is based on confidence. There is no doubt
:05:31. > :05:34.that estate agents in London, who by and large represent sellers, I can
:05:35. > :05:38.be confident about the future of house prices in the capital. If you
:05:39. > :05:42.look at property as an investment, whether UK resident or an overseas
:05:43. > :05:47.buyer who is facing potentially the prospect of Capital Gains Tax, then
:05:48. > :05:55.London property, with yields below 2%, is slightly confusing to many
:05:56. > :05:59.people. If you are going to invest in London, the traditional prime
:06:00. > :06:04.property areas remain the place where most people, sensibly, will
:06:05. > :06:09.look to purchase. If you are convinced from 6000 miles away that
:06:10. > :06:13.a ?1 million flat in Enfield or new is that an investment, I think you
:06:14. > :06:18.are the kind of person who thinks Prosecco is champagne. That is a
:06:19. > :06:23.dangerous road to go down. Niccolo, what kind of buyers are you seeing?
:06:24. > :06:29.Is this reflecting what you are getting from foreign buyers? Or are
:06:30. > :06:36.they viewing London as a place to invest or to buy for a residence?
:06:37. > :06:42.You can distort this this ticks as you want. In a cosmopolitan city
:06:43. > :06:47.like London, to talk of foreign buyers is a bit strange. If you look
:06:48. > :06:53.at 38% of the people who live in London are considered foreign
:06:54. > :06:57.nationals, to say that 70% of new homes are bought by foreigners is
:06:58. > :07:00.actually misleading. If you look at how many of those are resident, the
:07:01. > :07:09.actual foreign percentage goes down to 28%. The distinction is not
:07:10. > :07:14.correct. It is foreigners but as far as we are concerned it is foreigners
:07:15. > :07:19.that live in London. They want to be part of a deb `` development. There
:07:20. > :07:24.is an important point to make. If you look at the kind of bucks
:07:25. > :07:31.Northacre produces, they and the Candy brothers are producing a
:07:32. > :07:37.product that appeal to a different sort of market, who value poverty
:07:38. > :07:40.and different way. They take a global perspective. They are looking
:07:41. > :07:46.at buying an asset in the same way they might buy an expensive motorcar
:07:47. > :07:49.or jewellery. That is important to understand and there are developers
:07:50. > :07:53.and builders and estate agents who have understood that and are
:07:54. > :07:59.presenting a product to that market in a way that makes sense to them.
:08:00. > :08:01.It is the periphery that I think we would all agree is where buyers need
:08:02. > :08:07.to be more cautious. There are a lot of people around the world where an
:08:08. > :08:15.estate agent is a broker. Not in London. They are selling on behalf
:08:16. > :08:18.of the seller. This is the key point, that there are a lot of
:08:19. > :08:23.foreign buyers, to London for whom making a capital loss is not
:08:24. > :08:27.necessarily a problem. Protecting a certain amount of that capital is
:08:28. > :08:32.the priority. And ordinary Londoner buying a house is go to be in
:08:33. > :08:35.trouble if they use 30% of their investment. Somebody buying from
:08:36. > :08:40.abroad, buying into a safe haven, might feel fine about using even 50%
:08:41. > :08:45.over a 10`year period, depending on currency moves. You have got these
:08:46. > :08:52.different buyers. That isn't ordinary Londoner's problem. I want
:08:53. > :08:58.to ask you a bit about what attracts buyers in London. Is it the schools,
:08:59. > :09:02.the transport... Bear with me! Is it the nightlife of the restaurants?
:09:03. > :09:10.What appeals about the capital? All of the above. Including the
:09:11. > :09:16.transport? ! The people buying our developments, the transport is less
:09:17. > :09:20.of an issue. They come here for everything that London has to offer.
:09:21. > :09:23.One key point is the schooling system. The schooling system is a
:09:24. > :09:29.very interesting driving factor for people to want to own a home here.
:09:30. > :09:32.In fact, what we track as well is, for example, foreign enquirer is
:09:33. > :09:40.into the top schools outside London. Those are continuing to rise. There
:09:41. > :09:43.are more enquiries. Going back to your question of there is bubble or
:09:44. > :09:52.not, that underpins London real estate. They also want to be part of
:09:53. > :09:57.the British fabric. Owning a home here is also an aspirational place
:09:58. > :10:04.to own. What are you finding, Henry, in terms of your clients? Last day,
:10:05. > :10:08.just over 62% of my clients were from South America. They take a very
:10:09. > :10:12.mature and reflective approach to London as a centre for them to
:10:13. > :10:16.exchange their currency. It makes sense for them. Rather than the
:10:17. > :10:20.attractions, which I am sure we all agree on, that London as a place to
:10:21. > :10:24.come to buy property, whether to invest or live, the things that are
:10:25. > :10:27.threats for these people, the sort of things they are looking out for,
:10:28. > :10:30.after things in the UK we are not paying so much attention to. Our
:10:31. > :10:35.political system works very well, a stable system works well. In`built
:10:36. > :10:39.into that, politicians in the UK are like wind socks. They will change
:10:40. > :10:43.what they are trying to do with the sentiment. If there is a view that
:10:44. > :10:47.foreign nationals are not paying their share of tax, for example, we
:10:48. > :10:50.know that next spring they are introducing Capital Gains Tax for
:10:51. > :10:54.foreign nationals. There is talk as well of the three main parties in
:10:55. > :10:58.the UK undertaking to introduce a mansion tax. These old things that
:10:59. > :11:00.will make those who buy property in the UK perhaps reflect a little
:11:01. > :11:05.further about what they are doing and the way they are going to do it.
:11:06. > :11:12.Are your clients reflecting on that? Who are your buyers? First you
:11:13. > :11:15.have to look at the UK being one of the cheapest places in the world to
:11:16. > :11:24.own a property. If you look at the taxes in the US on real estate, you
:11:25. > :11:28.see that it hasn't deterred buyers. If you have a top end product, I
:11:29. > :11:33.think people will come. What specifically about the product are
:11:34. > :11:39.you finding most appeals? First of all you have got to create a nation
:11:40. > :11:42.where people want to live. People want and manatees, they want the car
:11:43. > :11:49.park, they were the facilities, the concierge. They want a place where
:11:50. > :11:56.they can display through the R. `` who they are. People want white
:11:57. > :12:02.walls. They want to display their art. That is what they are about. It
:12:03. > :12:06.is not about property, even if it is worth 30 million. The painting on
:12:07. > :12:11.the wall could be worth 50. That goes again to looking at, is in the
:12:12. > :12:23.bubble or not? Is it a bubble if you're house is worth 30 and your
:12:24. > :12:27.art is worth 50? Football clubs are another magnet for rich overseas
:12:28. > :12:34.investors, ranging from Russian oligarchs to Middle East and shakes.
:12:35. > :12:38.But is it a good investment? They call it the Theatre of dreams, home
:12:39. > :12:45.to the world`famous Manchester United club. It is owned by an
:12:46. > :12:50.American family who bought it in 2005 for over $1 billion. Across
:12:51. > :12:59.town, Manchester City has seen the deep pockets of its owner from Abu
:13:00. > :13:06.Dhabi. He is spent to web spent over $1.5 billion. Meanwhile, Chelsea
:13:07. > :13:13.football club has its own famous owner, Roman Abramovich. He is said
:13:14. > :13:20.to have spent $3 billion on his club since buying it a decade ago. It
:13:21. > :13:24.didn't return a profit in 2012 of over $2 million, but since then, it
:13:25. > :13:29.is a case of more going out than coming in. Football is an expensive
:13:30. > :13:34.business. The transfer window for buying and selling players has just
:13:35. > :13:41.set a record. Premier League clubs spent $1.1 billion. So while people
:13:42. > :13:46.might joke it is the only business where you invest billions to make
:13:47. > :13:58.millions, what is it that attracts the rich to buy English football
:13:59. > :14:07.clubs? Joining me as Simon Chadwick, profession of sports business and
:14:08. > :14:10.branding, Karen Stone, Harry Phillips, a senior adviser who used
:14:11. > :14:18.to advise football clubs on all aspects of finance. Welcome to all
:14:19. > :14:24.of you. Harry, you were in the business. Why do foreigners by
:14:25. > :14:28.football clubs? First of all, wealthy owners buy it as an ego trip
:14:29. > :14:33.because they can afford it and they want to be in the business.
:14:34. > :14:38.Secondly, looking at the Manchester City example, it is more of a state
:14:39. > :14:42.investment, they buy a club they are then going to the other state
:14:43. > :14:46.businesses into, in terms of using naming rights. It almost becomes
:14:47. > :14:54.like a country orientated destination. The third type is more
:14:55. > :15:00.American, they have sports interests in the US and they want to try to
:15:01. > :15:08.bring some of those business ideas into the English game and run it
:15:09. > :15:14.more as a business. Simon, it is not exactly a money making business, so
:15:15. > :15:19.why is there such interest? I'm sure many would question whether these
:15:20. > :15:22.entities are businesses anyway. They were set up as leisure clubs in the
:15:23. > :15:26.19th century and I think what they've done is morphed into
:15:27. > :15:32.something completely different to centuries later. So there is a
:15:33. > :15:36.juxtaposition in clubs often of organisations that operate in very
:15:37. > :15:40.complex, dynamic commercial environments, but still operate to
:15:41. > :15:45.principles founded back in the 19th century. I think that is an
:15:46. > :15:51.interesting issue. I agree with Harry, there are three main reasons.
:15:52. > :15:58.Financially, if we look at sports entrepreneurs like the glazier
:15:59. > :16:02.family, they are keen to generate a return for their investment. So at
:16:03. > :16:06.Manchester United we are seeing them actively pursuing a revenue
:16:07. > :16:11.generating strategy, by selling rights around the world. At
:16:12. > :16:17.Manchester City, we see a similar thing at clubs like Malaga in Spain,
:16:18. > :16:22.I think there is a certain amount of soft power behind this as well.
:16:23. > :16:28.Definitely a geopolitical agenda underpinning this. What I mean by
:16:29. > :16:38.that is, if we think about the Middle East and oligarchs, they see
:16:39. > :16:46.football as a way of influencing agendas on broader level. You go to
:16:47. > :16:51.a football game, it is exciting, interesting, people see you, you get
:16:52. > :16:58.the chance to socialise, to network. Football is allow you to do
:16:59. > :17:02.that. Carol, is that why they buy these clubs? Is it about networking
:17:03. > :17:08.and society and things that don't really have to do with what is going
:17:09. > :17:12.on on the pitch? I think that is true, but don't underestimate the
:17:13. > :17:17.vanity of people buying clubs. It is not because of the money. Now that
:17:18. > :17:21.Alex Ferguson has gone Manchester United are not doing as well as they
:17:22. > :17:27.were when the family bought it. I think people buy it partly because
:17:28. > :17:33.they want the fame, of course, and also we were talking about buying
:17:34. > :17:38.houses. They own a great asset. Roman Abramovich bought Chelsea
:17:39. > :17:42.football club, that is a great asset. He feels more British with
:17:43. > :17:46.that. And you like to see your name in the newspaper. It is hard work to
:17:47. > :17:50.become a network and to gather people about you. It is easier if
:17:51. > :18:00.you have something like a football club! Abramowitz... Some of these
:18:01. > :18:05.guys, they are business people. It is business that does not really
:18:06. > :18:14.warrant the money going on `` going in. That is correct, it is very
:18:15. > :18:18.difficult to make money in football. Why do we see people buying into
:18:19. > :18:24.British football? Simon and I were discussing this earlier. I think it
:18:25. > :18:29.is because in the English Premier League, you can buy the clubs. In
:18:30. > :18:32.Germany and other countries there are restrictions on purchasing
:18:33. > :18:46.clubs, said the first point is just the access ability to the clubs. ``
:18:47. > :18:51.access ability. Clearly the revenues in the game are rising, primarily
:18:52. > :18:55.driven off the back of television deals. All that money is flowing
:18:56. > :18:59.through to the players in essence. Money comes out the bottom to the
:19:00. > :19:03.players and therefore it is very difficult to build a business case
:19:04. > :19:09.to make a profitable business until you get wages and costs under
:19:10. > :19:18.control. Is that going to happen? Will be a change so football can be
:19:19. > :19:21.a business case? I think we are in the midst of a change right now,
:19:22. > :19:29.which I think is why we are talking about it now. The global TV market
:19:30. > :19:33.is obviously well developed and mature and sophisticated. There are
:19:34. > :19:38.tremendous revenue streams to be drawn from media markets worldwide.
:19:39. > :19:43.Merchandise sales can be developed in places like China, South America,
:19:44. > :19:48.parts of Asia. So now football clubs are starting to see a way forward in
:19:49. > :19:51.terms of certainly not being able to control their costs, I think they
:19:52. > :19:57.are impossible to control because of the nature of the labour market and
:19:58. > :20:00.the salaries, but certainly in terms of developing revenue streams, there
:20:01. > :20:04.is tremendous potential there. I think clubs see that as a way
:20:05. > :20:11.forward for developing their business and commercial activities.
:20:12. > :20:16.Carroll, looking at these clubs, it seems as if may be some people buy a
:20:17. > :20:21.club just to be part of society. They buy a club so they can invite
:20:22. > :20:26.people to the boxers, to enjoy the hospitality. How important is that,
:20:27. > :20:32.especially for the global elite who are looking for, I do know, a
:20:33. > :20:38.showcase of some sort? You are spot on. You can buy a house, but not
:20:39. > :20:45.many people come. If you actually want to be known, it is very
:20:46. > :20:53.important, when you are in the ink rout, you have to stay in the in
:20:54. > :20:59.crowd. You just think, what do we all want to do to network? We want
:21:00. > :21:04.to meet the politicians, the media, the business people. How do you get
:21:05. > :21:08.them together? I always say, if you want to network, you have to have
:21:09. > :21:12.somewhere to invite somebody. I would say, why don't you come for
:21:13. > :21:18.lunch or dinner or to my box? When you come I can bring a couple of
:21:19. > :21:23.other people who are also businessmen. That is how business is
:21:24. > :21:27.done. I think you are smart if you buy a club. The girls, money and
:21:28. > :21:34.fame is extra. I think it can be good business. It probably is a good
:21:35. > :21:44.business from that social perspective. Financially, until
:21:45. > :21:53.costs are brought under control, it is very difficult. We're talking at
:21:54. > :21:59.the very top level. So defined among the top 50 or 60 players in the
:22:00. > :22:03.world, they demand such fees that if you want your club to be successful
:22:04. > :22:09.at that level, you have to play what is the labour rate to get these
:22:10. > :22:20.players. OK, final round. Simon, would you buy a football club? No. I
:22:21. > :22:25.most certainly would. Maybe. It depends! If I was well be enough to
:22:26. > :22:29.be able to buy one, I definitely would, because I love the business.
:22:30. > :22:36.In terms of an economic model, there is a long way to go. Thank you to
:22:37. > :22:40.all of my guests. There are a number of reasons, not always related to
:22:41. > :22:43.profit, that cause people to buy football clubs.
:22:44. > :22:49.After all, David Beckham is the owner of the latest one in America.
:22:50. > :22:53.There is also a host of reasons why foreigners buy homes in London,
:22:54. > :22:57.including its being a good investment due to low occupancy
:22:58. > :23:04.costs. Buying British still seems to be in vogue. That is all from me
:23:05. > :23:08.this week. Check out Twitter and tune in next week.