After the initial week of damage control and reflection, property specialist Paul Munford tells Oleńka Hamilton that London will be more than fine.
Over a cappuccino at the Arts Club in Mayfair a week after the EU referendum, Paul Munford is still recovering from the ‘massive heart attack’ that hit the financial markets following Britain’s vote to leave the European Union. Munford counts some of the world’s wealthiest people among his clients at the two companies he owns. MCIFA Property Finance is a brokerage for high-value residential and commercial mortgages, and has been going for almost 30 years, while Century Capital, now five years old, is a lender which specializes in bridging loans.
‘Friday after the vote everything fell off a cliff in terms of transactions,’ he says, clearly still reeling from the impact. ‘I don’t think anyone in my business could have been for leave because of the transition period – the cost of finance is bound to go up and people are selfish.
‘What this referendum really taught us is that you ignore the North of England at your peril,’ he adds, suggesting pollsters, most of whom predicted ‘remain’, were collecting all their data on Threadneedle Street in the City of London.
But it is what it is and Munford is making the best of it. ‘It is business as usual with a twist,’ he says, sounding almost perky. ‘And it’s quite a big twist. We now have to work harder to find our clients what they want; we have to be aware, think ahead more and be positive.’
That said, Munford himself seems to be doing more than okay. In fact, neither of his companies has experienced any distress. On the contrary, business is thriving at Century Capital in particular, which, as a lender, capitalises when money is scarce. Similarly, MCIFA can be expected to benefit from the uncertainty, with demand to borrow on the rise as people seek liquidity to secure themselves in uncertain times.
And, after the initial week of damage control and reflection, he expects Britain to be quite alright too. Where the Bremain campaign went wrong, he says, was in predicting a post-Brexit apocalypse. ‘Is it going to be hell on earth in London after we leave? Well, apart from all the rain…’
‘I’m turning into a ‘Brexit apologist,’ Munford jokes, but he is optimistic. As the ‘Leave’ camp stressed throughout their campaign, Britain imports more than it exports which means, in simple terms, that the world tends to need Britain more than Britain need the world. And with a weaker pound, investment from outside is bound to come flooding in.
People are already taking advantage of a 10 per cent drop in property prices, and why wouldn’t they? Munford asks. ‘The fundamentals are very good,’ he says, pointing to low interest rates and a reasonably low level of debt compared to the value of property. An auction at Savills – which is usually indicative of the state of the market – held following the referendum, saw 90 per cent of lots sold, about 20 per cent more than usual.
The Remain camp’s scare-mongering has, in general, been proven wrong. The fall-out was never going to be anything like the crash of 2008, he says. Back then people were very highly borrowed, with mortgages of between 80 per cent and 90 per cent, whereas now an average mortgage is closer to 50-60 per cent which means people are not forced to sell.
When we spoke the week before last, the stock market, which was also predicted to crash irreversibly, was 5 per cent higher than it had been before the referendum. Since it is the ‘root of people’s wealth’ and impacts people’s long-term savings, this can only be ‘a good thing’, says Munford. There have been no large scale job losses either, Munford points out, but rather gains, particularly in the banks where the greatest disasters were predicted. Even the euro was down only 5 per cent. ‘It’s not as bad as people thought it would be,’ he says.
Although he expects a six month recovery period, Munford says the key to financial stability is political stability. Since markets rely on confidence, things will only begin to steady once a new Prime Minister is in place and a new budget has been announced. The question of the Tory leadership contest evoked the same look of desperation in Munford as in most other people be they Bremainers or Brexiteers, but he, like most in the financial world, thought Theresa May was probably the best of an uninspiring bunch.
Another upside to the Brexit for Munford is finally seeing the back of George Osborne, the former chancellor. Munford is scathing of Osborne’s ‘obsession’ with austerity and keeping the deficit intact. ‘We could rip it all up and say we don’t mind if our deficit increases – there’s no need for austerity because the UK is a growing economy,’ he says. Even though it will have a cost to the economy initially, in the long term he expects it would encourage job creation and increase transactional volume in housing. He wants to reduce corporation tax to 5 per cent to encourage more tech and manufacturing companies to set up base in London, and bring down stamp duty too which, at 12 per cent, is ‘ludicrously high’.
Whatever happens, London will be fine, he says, laughing off suggestions by The Economist that Paris, Vienna or Frankfurt were set to replace it. ‘Have you ever been to Frankfurt?’ he asks me, grinning. ‘It’s hardly a city that’s going to attract people in the way that London does. Even outside the EU, it will always be somewhere people want to live and do business in. The people are tolerant and it is culturally diverse, we have the best healthcare, the best education system in the world, and the fairest legal system. London could thrive outside Europe.’