This Week in Property: The Latest News (3rd September 2021)
Take a look at what our CEO Gill Fielding has to say about this week’s property news…
Track that Tracker
I am huge fan of tracker funds (which broadly are a share soup of investments that track or mirror a particular index like the FTSE or DOW) because they offer the same return as the stock market as a whole and they tend to be easy and very cheap to manage and maintain. And it turns out that lots of people agree with me and more than 18% of UK funds under management are now in tracker funds, up from 6.9% a decade ago. But we are a long way behind the Americans where 45% of investments are in trackers.
Trackers make sense because you get the exposure to all the shares in the market and get the benefit of a spread of risk whilst getting the same overall return of the stock market in general.
For most people this is plenty good enough and the returns over the very long period tend to settle in the 9%-10% range (with dividends reinvested). They’re also cheap and the average tracker fund management fee is usually far less that 1% and as low as 0.01% in some cases.
Compare this to the fees that share brokers charge to invest for you which tend to be in the range of 2%-5% and in that case you’re expecting the broker to beat the market all the time which is difficult. Trackers win. Everybody can invest in a tracker, you can put them in your ISA or pension and they make sure the maximum possible is invested in the shares themselves rather than fees.
The pandemic has left us all feeling like we need more certainty in our lives. The sense of being out of control is an uncomfortable one and it seems that our larger corporations feel the same and I’ve seen two finance deals encouraging people to create long term certainty for the business concerned.
Smaller banks in particular are now offering higher rates for long term savers. Rates on 12 month fixed accounts have nearly doubled from an average of 0.84% in June to 1.41% in August. Two year rates have risen from 1.43% to 1.67% and three year fixes have risen from 1.53% to 1.76%. These rates are high (comparatively) and show that the banks need funds and some certainty of cash flow just like we all do as individuals.
Also I read that HSBC are now offering loyal customers a discount on their mortgage rates to encourage them to stay with the bank rather than switching suppliers. So for example a two year fixed mortgage interest rate is currently 1.39% but that is discounted to 1.29% for existing customers. It’s a small discount but worth a few quid every month nonetheless and it seems that loyal customers are starting to get better service as many financial service companies realise that they need to hold onto customers otherwise their future is uncertain.
There’s no vaccine for uncertainty but we all crave it after 18 months of uncertainty and businesses are no different to other ‘people’.
There’s news this week about Lloyds Bank aiming to buy and rent out 50,000 homes by 2031. The bank have joined other larger organisations – like John Lewis – in the property investor market.
There’s lots at play here; firstly the organisation are looking for more security as their traditional market places have weakened, and this move spreads their business risks. Then property provides a better return on their money than their normal business and property is always a strong investment.
This is an unusual move for the UK but it’s quite common on mainland Europe where property is more traditionally owned by larger corporations, pensions funds and so on. It seems that, in one area, the UK has become, behaviourally, more a part of Europe despite Brexit. It remains to be seen whether these larger organisations offer a decent service and I suspect rents will be higher than you can get from your local, smaller landlord. I also suspect maintenance response times will be slower as the larger home providers will have to have procedures and systems to implement, rather than a one person band going out with their spanner when called.
Of course, there is one other knock on affect of Lloyds’ activity. If they’re buying up all the new builds and developments – what’s left for the domestic purchaser? And that activity will certain push property prices up.
Incentivised to work
How the job market has changed! In the bad old days you were lucky to get a job and if you had a job you were punctual and worked a bit ‘extra’; just to keep your position – not any more. Some employers are so desperate for staff they’re now offering them bonuses – just for doing their job properly. And Amazon have now offered their staff an extra £50 per week bonus for turning up to work on time. In order to get it the staff member needs 100% attendance (except Covid and sickness absences) and to be on time.
This announcement follows Amazons other initiative of £1,000 joining bonus for new warehouse workers. How the world has changed and the power is now definitely with the employee rather than the employer and the workplace has changed to give more flexibility for people who can make demands on their employer that I could never have dreamed of as a young person entering the jobs market.
Now only the most flexible and friendly employers will be able to pick and choose their staff and job seekers know that they now hold the power. Amazing times!
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