This Week in Property: The Latest News (25th February 2022)
Take a look at what our CEO Gill Fielding has to say about this week’s property news…
What we did in the olden days….
There’s been a lot of chatter recently about how people can get started on the property ladder and one suggestion was that young couples move in with a parent whilst they saved a deposit – and there’s been a bit of an outcry as if this is some inhumane activity and needing to be reported to the cruelty charities. Well I hate to say it but this isn’t a new concept and in fact it has been quite common in the past and when my dad came out of the army in 1945 he and his young bride, my mum, went to live with his dad in a rented house and my grandad lived upstairs and my parents lived down. This only changed when my brother came along in 1948 by which time grandad moved out and my dad decided he’d like to buy the house and approached the landlord and agreed to buy it from them at the amazing rate of 10 bob per week (50p in new money!). Now a couple of this strike me: firstly there’s nothing new and what my dad did was actually a sale and finance by vendor deal which contemporary property investors think is a new thing – but clearly it isn’t and secondly it’s the sense of entitlement that we appear to have nowadays. Some people want money and properties on a plate without having to work or save for them and that’s not right or fair. If you have to work an extra job or two or live with parents in order to get onto the property ladder – do it and get going! No-one owes you a living so you may as well get on with creating one for yourself – you’ll reap the benefits in the end!
Now the pandemic has created some very weird outcomes and there’s none weirder than what people did with their homes during the last couple of years. According to Zoopla 8.9 million bedrooms were repurposed for other things: 5 million became home offices; 1.3 million became gyms: 984,000 became bars, 900,000 became cinemas(!) and 688,000 became classrooms. Apparently we spent an average of £3,714 on these conversions. Now clearly Zoopla are interested because they need to accurately describe properties for sale but what they don’t mention is the number of rooms that became ‘junk’ stores, dozing rooms, laundrettes, rooms for ‘space’ during arguments or Covid test storage – I bet that was a lot more than 8.9 million and I wonder how they will be described on the property particulars!
Do you want to earn £125k p.a. for doing nothing?
Now most people would love to earn £125k – whether they had to work for it or not and figures out from Rightmove confirm that in the month to February property prices in the UK rose by nearly £8k in the month. Now I worked out that £8k a month equals £96k per year or if you gross it up for tax and NI, it comes to about £125k. Wow that’s not bad for a salary but sadly for most people their house earns more than they do over a working life – and that’s why it’s worth pushing the boat out and working extra jobs etc to get on the property ladder when you’re young! It’ll serve you all your life!
To rent or buy?
I read a piece today about handbags. I have to say I’m no fashionista and although I do have a few handbags, collected over time, I don’t think I’ve ever paid more than £100 for one and I’m not in the market for making a large collection. And it sounds like many others are making that same decision as handbags have become big in the fashion world but can cost several thousands of pounds and that’s serious money just for a receptacle for your keys and phone! But now, of course, you can rent a handbag and the one quoted was a Gucci bag at £40 per week which is much more reasonable but wouldn’t you want to go out every day with it just to get your monies worth? Anyway, it got me to considering when it is better to rent and when to buy and of course the old adage is that you rent if the thing you’re looking at is going to go down in value and you buy if the thing is likely to go up. So with a handbag my guess is that renting is the better option and for most things it’s quite easy to tell whether the thing is likely to go up or down but there are some other considerations. With cars for instance, a regular family car might go down but a prestige vehicle might go up – and in that case it’s an asset and a collectors item. And we can take the same approach to housing. In the main houses go up in value over time so you’re much better buying than renting. It’s a simple clear cut decision but many people get confused with the purchase or rental debate and bogged down in that one – but all you need to do is to think what would I do if it were a handbag!
It pays to think long term……
My view is that too many people make snap, short term decisions without thinking too much about the ramifications or longer term consequences. And I’m in my 60’s now so I’ve seen many things go around and come around in my time but nothing is as bizarre as China and babies! China implemented their one child policy in 1980 which ended in 2016. What resulted was a surplus of boy babies (which were regarded more highly than girls) and I remember us as a family considering adopting a Chinese girl baby as so many were being abandoned because if you can only have one child and you want a boy and then a girl pops out what do you do? It turns out than many people just left their girl baby by the roadside – or worse. And now of course, the policy has created several issues. There are now so many adult men without female partners (estimates are that there are 35 m more adult men than women) which has led to social unrest in some areas and they now have a shortage of women and babies! The shortage of babies has now led the Chinese government to implement a paid for IVF policy and fertility treatments in order to boost the birth rate. Talk about an about turn! It’s an interest piece of history to have witnessed but like whole countries sometimes people make decisions based on today or next week and not on their long term future. If you consider that with your investing you could create a huge amount of money but if you don’t think long term with your money, you’re likely to retire penniless. China as a country can afford to buy its way out of mistakes but as an individual you won’t be able to – so THINK about the decisions you make and the ramifications and long term consequences.
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