{"id":1240,"date":"2015-06-11T13:30:32","date_gmt":"2015-06-11T13:30:32","guid":{"rendered":"http:\/\/poseidon-gp.com\/property\/?p=1240"},"modified":"2015-06-11T13:30:32","modified_gmt":"2015-06-11T13:30:32","slug":"luxury-property-chief-on-social-housing-armaggedon-and-how-to-spot-the-next-housing-market-crash","status":"publish","type":"post","link":"https:\/\/poseidon-gp.com\/property\/luxury-property-chief-on-social-housing-armaggedon-and-how-to-spot-the-next-housing-market-crash\/","title":{"rendered":"Luxury property chief on social housing, Armaggedon and how to spot the next housing market crash"},"content":{"rendered":"
\n

At first glance, Alex Michelin, a co-founder of Finchatton, seems every bit the suave developer of luxury properties.<\/p>\n<\/div>\n

\n

His suit is as well fitted as the opulent interiors that he designs, and he sits at a table covered in glossy brochures of Knightsbridge penthouses his company has built, converted or styled \u2013 or all three. But, upon closer inspection the resemblance to other high-end, London-based property bosses starts to dissipate.<\/p>\n<\/div>\n

\n

Finchatton\u2019s base may be just a 10-minute walk from Sloane Square. But it is located quietly off the King\u2019s Road. The office is discreet, understated and conservative \u2013 and says much about the company\u2019s two founders, Michelin and his schoolmate, Andrew Dunn.<\/p>\n<\/div>\n

\n

\u2022 Young princes, students and bachelors: the new Mayfair elite<\/strong><\/a><\/p>\n<\/div>\n

\n

\u2022 The cost of buying in Britain’s most beautiful spots<\/a><\/strong><\/p>\n<\/div>\n

\n

Comparisons have been made with other young male duos in the property world, such as the Candy Brothers, who raised finance to create Knightsbridge\u2019s high-profile One Hyde Park, in 2006. But there are no celebrity wives nor demonstrations of ostentation here.<\/p>\n

What sets Michelin apart from other property developers in central London are his background and qualifications, and his cautionary stance on the market. He was born in Jamaica, educated at Charterhouse, studied at Nottingham University, and has gone from being an economist to a banker, and now developer and interior designer.<\/p>\n

Forecast for the London prices<\/h3>\n

\u201cWe\u2019re in the latter end of this boom,\u201d the 38-year-old says, referring to the fact that central London has generally outperformed the rest of the UK housing, and most markets in the world, for the past decade. \u201cWe\u2019re now going to see a period of steady growth as interest rates are still incredibly accommodating, but prices are not going to race away.\u201d<\/p>\n

He pinpoints interest rate rises \u2013 now expected next year \u2013 as the likely catalyst for the next price correction in London. And Michelin gives the impression he\u2019s more comfortable in this relatively benign environment than the heady days of 20pc annual house price growth that could be seen a year ago.<\/p>\n

Finchatton is a private company and was founded after 9\/11, with the UK in the throes of the dotcom recession. It has a construction division that transforms tired industrial buildings in Mayfair, Kensington and Knightsbridge into multi-million-pound homes. It also fits out the interiors of mansions, penthouses, private jets and yachts.<\/p>\n

Over the past 14 years, these two public-school friends have helped to curate the lives of the super-rich. But former HSBC financier Michelin also knows the signs that the feverish London market has grown too hot.<\/p>\n

\u201cWarning signs [for the 2008 crash] started in 2006,\u201d says Michelin. \u201cThere was chatter that the demand for London and the high-end product would not abate and the massive upturn of 2005-2006 was the new norm. But for me, this was nosebleed territory and we stopped buying.\u201d<\/p>\n

At this point, the business, which started with the conversion of a \u00a3900,000 basement apartment in Mayfair and now has more than \u00a31.3bn of projects under development, was not \u201cmassively exposed\u201d, he says.<\/p>\n

\u201cWe did have a mews house in Knightsbridge and we chopped the price to get rid of it. The market was a falling knife and we didn\u2019t want to be at the bottom of the falling knife, we wanted to try to catch it.\u201d<\/p>\n

As property speculators and developers were continuing to pile in, Finchatton was pulling out. For Michelin, an economics graduate, three key signs set off the alarm bells.<\/p>\n

    \n
  1. “You would go to a bank with \u00a35 and they\u2019d give you \u00a31m. We were getting calls saying: ‘Don\u2019t put in any money, we\u2019ll fund it all.\u2019<\/strong><\/span><\/li>\n
  2. People were buying property, then flipping it six months later, having done nothing to it.<\/strong><\/span><\/li>\n
  3. The chatter from the agents was that this was the new norm.\u201d<\/strong><\/span><\/li>\n<\/ol>\n

    So does he see any similar behaviours today? \u201cDevelopers are overpaying for land transaction prices, and risking their balance sheets,\u201d he says. New entrants to the market are perhaps unfamiliar with the London market, such as some Chinese and Indians, he adds, who are building on the Nine Elms site and in Grosvenor Square, respectively. \u201cBut it\u2019s not just international money taking risks \u2013 British developers who should know better are also piling in,\u201d Michelin says.<\/p>\n

    Armageddon planning<\/h3>\n

    He is the first to admit that his cautious approach to buying has meant his company has not made as much money as some rivals \u2013 but it\u2019s also not lost as much, he is quick to add.<\/p>\n

    While co-founder Dunn heads creative design, Michelin, the money man, carries out what he calls \u201cArmageddon planning\u201d before any purchase. \u201cWe work out what we\u2019ll make if the market falls 20pc, or we go over budget, or over schedule by six months, and then assess what if all negative scenarios hit at once, and what we\u2019d make.\u201d<\/p>\n

    The pair, who are thought to have now completed around 100 projects with a gross development value of more than \u00a31bn, have benefited from the 2001 and 2008 recessions by picking up buildings on the cheap.<\/p>\n

    The company\u2019s big current project is the former US Navy headquarters in Grosvenor Square, which has been bought by a consortium of international developers and for which Finchatton is development co-ordinator. The company is also on the cupse of overseas expansion in the development side of the business, with a construction project in Barbados and a deal being done for a site in New York.<\/p>\n

    International buyers in London<\/h3>\n

    While Michelin\u2019s dream is to build what he calls \u201clegacy buildings\u201d his cautious approach is taking the firm out into zones two and three to capitalise on the growth in property values as central London slows.<\/p>\n

    The father of one is also a vehement supporter of the international business community in London, and says overseas buyers have grown from 35pc of the high-end central London market to more than 50pc.<\/p>\n

    \u201cSo much air time is given to the argument that international investors are destroying the whole of London in terms of affordability, and that\u2019s just wrong,\u201d says Michelin. He points out that high-end central London encompasses just 500,000 homes in a city with a population of 14m.<\/p>\n

    \u201cWhat\u2019s destroying affordability is a lack of reasonably-priced homes and we have paid \u00a310m in contributions to local government to help build more homes, so, in fact, foreigners are subsidising housebuilding in this country.\u201d<\/p>\n

    However, while international buyers, and the weakness of the pound, were the reasons why London came out of recession so quickly after the 2008 crash with prices up 20pc again in just nine months, they also pose a major threat.<\/p>\n

    \u201cInternational money is completely discretionary and such high net-worth individuals can buy here, Monaco, Paris or Toronto in a split-second decision,\u201d he says. The emergence of another global property hub or a desire to seek higher returns could knock London\u2019s residential property crown. \u201cThat is the danger in politicians messing around with our [tax] policies without understanding just how discretionary the London property market is,\u201d he says.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    At first glance, Alex Michelin, a co-founder of Finchatton, seems every bit the suave developer of luxury properties. His suit is as well fitted as the opulent interiors that he designs, and he sits at a table covered in glossy brochures of Knightsbridge penthouses his company has built, converted or styled \u2013 or all three. […]<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,1],"tags":[],"class_list":["post-1240","post","type-post","status-publish","format-standard","hentry","category-news","category-uncategorized"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9PjAq-k0","_links":{"self":[{"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/posts\/1240","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/comments?post=1240"}],"version-history":[{"count":0,"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/posts\/1240\/revisions"}],"wp:attachment":[{"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/media?parent=1240"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/categories?post=1240"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/tags?post=1240"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}