Speaking at an Investec Private Banking event with the theme ‘Prime London property prices & the recent tax implications’, McGivern noted that in the current ‘unfair’ environment even the most well-paid young professionals will fail to buy property in the capital.
This is down in part to the government’s QE programme, he said, where the Bank of England electronically creates money and purchases gilts from private investors. The total stock of QE currently stands at £375bn.
McGivern said: “Earning money is strictly 20th Century. Why earn it when you can print some?
“The biggest effect of QE has been to boost asset prices. What it’s done is skewed the playing field between haves and have nots – specifically the older generation and the younger generation.
“The older generation own properties and the younger generation rely on earnings and they don’t have the assets to boost them.
“They can do a very good job as a solicitor, an accountant, a banker, a stockbroker and they don’t have a chance of buying in London unless they’ve got the best bank in the world – the Bank of Mum and Dad.
“The Bank of Mum and Dad is effectively the middle man between the central banks and the younger generations, so the problem is without those assets they are absolutely stuffed and that will cause huge social unrest in the years to come.
“Earnings are totally irrelevant. Is it unfair? Yes.”
In London the divide between property haves and have nots is set to continue because of foreign investment in homes and infrastructure, which McGivern stressed will only favour those who already own homes. He also brought up changes to pension rules, which could see retirees buy up more housing stock with money released from pension funds.
McGivern added: “Those who earn the land always reap the lion’s share of any increase in economic activity and profits.
“London will continue to expand as money is attracted to it – the obvious example is Crossrail.
“If you happen to have bought a house in Slough 15 years ago you have hit the jackpot by doing absolutely nothing, just by being fortunate enough to have a Crossrail station going through your town.”
In future he anticipated the young buyer of tomorrow moving further afield on the London commuter belt.
He said: “Don’t worry – first-time buyers aren’t going to go homeless.
“They will do what they have done in every single property cycle since London was first created – they will move further out.
“When I first came to London in 1989 I rented a flat in Notting Hill and in 1989 pretty much every other house was a crack house – slight exaggeration but Notting Hill was the not the Notting Hill of today.
“You wouldn’t go to Shepherds Bush. Kensal Rise, Queens Park and all those lovely places? No. Shoreditch? Yikes. Nappy Valley [between Clapham Common and Wandsworth Common]: back in 1989 you went there on Saturday night to get stabbed!
“This is what happens in every single cycle. People move further afield.”
He added: “Just as Acton today is the Notting Hill of 30 years ago Slough in 20 years’ time will be the Acton of today.
“When you truly understand the implications on infrastructure changes and transport changes then you can invest wisely and make a lot of money.”
