PropertyInvesting.net: Property Investment Special Reports

PropertyInvesting.net team 

More objective guidance and insights for property investors. Our aim is to help you improve your investment returns, flag key risk areas and stimulate strategic thought so you can position your portfolio to maximize gain, for the 25,000 daily visitors to the website. This Special Report describes the very best UK property investment areas – in our opinion - in a five year time frame. The strategy described considers the following property investment socio-economic and investment criteria:

1.      Regeneration – big public and private sector projects that lead to positive change

2.      Infra-structure developments – new rail, tube, road, airports etc

3.      Major new projects – retail, government, private (e.g. Olympics, Westfield, Nine Elms)

4.      Population – areas of expanding population and inward migration

5.      Energy scarcity – areas least affected by high oil, gas and energy prices as Peak Oil affects start to  kick-in

6.      Baby-boomer wealth and retirement – pied-de-tier, second homes, semi-retirement homes, where baby-boomer that have 75% of the UK wealth want to live

7.      Employment – new jobs, new high paid jobs

Regeneration

Beyond any doubt, the largest amount of money being spent on regeneration in the UK is in London – and focused on East London (Stratford and surrounding areas). We list below some of the London and UK projects that investors should consider:

·          Stratford-Bow-Plaistow-Canning Town – London

·          Nine Elms and Battersea Power Station – SW London

·          Brentford – West London

·          New Cross-Deptford-Peckham – SE London

·          Barking, Romford, Dagenham – E London

·          Elephant & Castle – S London

·          Croydon – S London

·          Holbeck-Beeston – S Leeds

·          Woolwich – East London

·          Docklands and East - Hull

·          Docklands – Glasgow

·          North Docks, L1, L3, L5 and general - Liverpool

·          Stretford – W Manchester

·          Bradford city centre

·          Birkenhead Dockland – Wirral

·          Brent-Cricklewood – NW London

Example 1 - Stratford:  The list above are not all regeneration projects, but they probably capture about 80% of the key projects. About half are in London and the biggest is East London. Remember, East London is one of the most deprived areas in the UK – Newham for example has a 55% ethnic minority (actually a majority in this case) and average wages are low particularly by London standards. East London has been coming up for years, and it will take many more years before regeneration slows down. Still a long way to go. There are many fully tenanted tower blocks and council estates that need improving. But with the proximity to Stratford, Docklands and City, the area will benefit enormously from the affects of the Olympics. Property prices will never attain the giddy heights of West London property because most very wealthy people like to live in elegant Victorian and older property – but the outlook in the run up to the Olympics is positive for not only regeneration, but new jobs, wealth and a general population increase. The new High Speed One (Eurostar) link to Paris and Brussels from Stratford is another big plus. Excellent tube connections is another plus. New businesses and retail will move in, in the run up to the Olympics. And it’s only 7 mins by train to St Pancras.

Example 2 – Nine Elms:  This is an important new large regeneration project. Nine Elms is an area 1½ miles long and ½ mile wide that runs north-south along the Thames South Bank (or East Bank) in London. The area is run down but large new residential and commercial premises have and will be built in the next five to ten years primarily along the river. The most prestigious is the new US Embassy complex – the US announced they were moving from Central-West London to Nine Elms earlier this year. Battersea Power Station also looks like it will be developed at long last. And there is even talk about a Battersea tube station. The area is opposite Pimlico-Victoria, and serviced by Vauxhall rail and tube station. Development will be north of the famous Battersea Dogs Home and south of Vauxhall inter-change along the river. Any second hand residential property in close proximity will we believe rise in price at a higher rate that normal London property. Probably the best strategy is to purchase good quality brick built ex-council or Victorian flats and/or houses close to the River Thames at good value. This worked very well in the South Bank Waterloo area about five-ten years ago and will work well in the SW11 and SE11 Battersea-Vauxhall-Lambeth-Kennington areas in the next ten years. In essence, central London is extremely close to this regeneration area – just over the river. The benefits of this proximity will surely spread south – ripple out – towards Elephant & Castle. Remember, the official centre point of London is Charing Cross Station – and this is only about 1 ½ miles from Nine Elms. Some parts of Kennington are only ½ mile from Westminster House of Parliament. Also, Chelsea and Mayfair are only about 1½ miles from Nine Elms. It really is very central. More and more wealthy city financiers will move into Kennington-Vauxhall-Battersea areas – so it really is a good area to invest in, in our opinion.

Infra-structure developments – new rail, tube, road, airports.  Again, London has the biggest infra-structure projects. The population of ten million people delivers about 25% of the UK GDP. Large mass transit system are required to facilitate this economy and services. London is also the biggest tourist destination in the UK by far – also requiring continual improvements in transit. To list a few of the big projects:

·          East London Rail:  Highgate, Haggerston, Shoreditch, New Cross, Croydon (see map below)

·          Dockland Light Rail extension: Woolwich Arsenal

·          Crossrail: West to East Rail Link (see map below)

·          Heathrow: Terminal 5 (and potential second runway)

·          Battersea Tube Station: plan for 2015

·          Eurostar: St Pancras, Stratford, Ebbsfleet (open)

·          Eurostar: Waterloo Terminal – re-opens 2014

Our guidance is for serious property investors to review the maps on our website and look at overlapping spheres of influence with regard to how the new stations link with new offices, jobs, developments and proximity to retail and leisure activities. An example is Bow in East London. On the NE side – Stratford and the London Olympic village and development. To the south is the massive Dockland office-financial centre. To the west is the City square mile – financial centre. Surrounded by new jobs, development and financial services but a fairly deprived though up and coming area. We expect Bow to improve over the next 5-10 years as prosperity ripples through from Clerkenwell, Shoreditch and Limehouse. And second homes and pied de tier will become more popular in the next ten years – prices we believe will rise faster than the norm.

Population

If the population increases and new housing cannot keep up with demand, property prices and rental prices will rise. This we believe is true on London and most parts of southern England. As industry becomes more business services oriented and shifts away from manufacturing – jobs will be created in southern England and with it, the population will rise. Furthermore, London is a magnet for immigrates of all wealth levels –ultra-rich to relatively poor. Immigrated tend to have larger families – studies have shown the most of the UK population growth is from families that were not settled in the UK in the 1960s. Hence the population of London is expected to expand significantly in the next ten years – by about 800,000 people. So unless 400,000 new homes are created – supply will not keep pace with demand and prices will rise. We also expect acute shortages of property in Cornwall as more Londoners move there – and almost zero building takes place. The county has the most rapid population growth of any large county in the UK – so expect prices to drift higher. Cornwall’s popularity with South-Easterners and Midlanders will remain high. Expect similar trends in Devon and Dorset as well – both population and new business will increase. Exeter with the Met Office is a good example of a booming city in SW England that has a housing shortage. Truro and St Ives in Cornwall are other examples. If anyone can recall seeing any new housing estates in these areas, we would be surprised – meanwhile more people migrate in, less people leave and the population also increases with people living longer.

Energy scarcity

Peak Oil is definitely worth serious consideration. We believe maximum oil production took place July 2008 and we are now on a bump plateau until 2015 after which oil production will drop. Because global oil demand is likely to rise by 1 to 2% per annum henceforth, in a year or so, oil prices will sky-rocket as supply cannot keep up with demand. Speculators will probably drive prices even higher than they would normally go – in part driven by the investment herd instinct. When oil prices rise above $100/bbl, the USA will likely slip back into recession. Some early signs of this are happening at $80/bbl – don’t say we didn’t want you! Remember, the USA’s current oil import bill at $68/bbl is $19.5 Billion a month. If oil prices rise to $136/bbl – that’s $39 Billion a month – not much of this money goes to friendly countries either. That’s about 3% of GDP – enough to dip the country into recession. The UK will only be affected by the general global economic slowdown caused by high oil prices because it’s import bill is negligible at present – though this will get worse over time. For the USA, the really frightening thing is the MedCare bills per person per annum of a staggering $6200. Expect the dollar to continue to decline, oil prices to rise and the Fed to continue to try inflating the US economy in vain attempts to head of recessions – US inflation is just around the corner as well. In ten years, we have never been remotely as downbeat about US prospects as now. And we are very worried about the affects of Peak Oil in the USA and it’s economy.

For UK property investor, the least affected places from the ravaged of Peak Oil in the UK will be London and Aberdeen – both cities that have huge business and capital inflows when oil prices rise – and have low oil intensity per unit GDP created. London also benefits from a fairly affective mass transit in London’s – despite all the complaints (visit Los Anglese if you want convincing). So best to purchase property close to good electric rail links to jobs – or in central urban areas where people can walk, cycle or take the bus/tube/train to work. Increasing taxes and transport costs will make long distance commuting less popular – albeit more people will be working part-time from home using the latest IT. Some example of less exposed Peak Oil areas are:

·          Borough London – walking distance to City finance jobs

·          Kennington London –walking distance to West End jobs

·          Ebbsfleet-Gravesend-Southfleet – fast electric rail to London St Pancras

·          Woking – fast electric rail to London

·          Luton – fast electric rail to London

·          Statford – 5min electric train to St Pancras, 12 mins on tube

·          Aberdeen – global oil industry jobs (possible renewables job later)

·          Bayswater – walking distance to West End jobs

·          Shoreditch – walking distance to City jobs

Probably best to avoid areas around Heathrow airport because we expect massive airline lay-offs in future years because of:

·          Environmental lobby and climate change

·          Tax on aviation fuel

·          Increase in aviation fuel prices

·          Less inter-continental, European and domestic flights

·          No further expansion

·          Airlines going bust! (or at best merging and rationalizing)

As long as Peak Oil does not lead to civil disorder, London will probably fend better than most other areas in the UK. And any nice city, town or village with fast electric rail link will benefit relative to other areas.  

Baby-Boomer Wealth and Retirement

About 75% of wealth resides with the over 45 year old baby-boomer generation. They stole a march primarily through the continuous property price boom from 1994 to 2007. The bulk of the wealth in the UK still resides in property and is likely to in future we believe (let’s face it, it’s very difficult to make serious money on the stock market, wouldn’t you agree?). As these people wealthy retire, they will tend to move to select nice areas – and possibly downsize a bit in the process. People in the north will tend to shift further south to take advantage of better weather (some will move abroad to Spain). There will also be general shift to nice university and historic market towns and cities. And some will move to select coastal regions – sun, sand, sea.

Some examples

Inland                                      Coastal                                   Cities

Harrogate                                Whitstable                               Bow/Limehouse-London

Stratford-On-Avon                   Southwold                               Chelsea-Mayfair-London

Lincoln                                     St Ives                                     Bristol

Winchester                              Lyme Regis                              Portsmouth

Wells                                       Swanage                                Cambridge

Bath                                        Falmouth                                 Oxford

Ludlow                                    Sandbanks                              York

Truro                                       Skinningrove                           Durham

                                               Jersey                                     

                                               Isle of Man

                                               Brighton

Increasingly older people will be more active – they will want theatre, culture, cafes, restaurants, cinema, shops, history, special interest sites. So it might seem counter-intuitive but Mayfair or Soho will be a top retirement (pied de tier) destination. As will Oxford and York. Coastal towns and villages will also be popular, but the days of old people sitting in deck-chairs waiting to “pop-their-clogs” is well and truly over. The 60-80 year olds are all dashing around enjoying themselves as long as they remain fit. People will live longer and become more active in old age. Hence proximity to National Parks or Areas of Outstanding Natural Beauty will be other pluses. And the best restaurants will also be important. One reason why Padstow-Rock (“Padstein”) and Ludlow are so popular with wealthy retirees.

Employment

Proximity to high paid jobs is key to supporting rising property prices. One reason why Battersea, Greenwich, Bayswater, Highbury, Primrose Hill and Borough see prices continuing to rise – these Victorian and Georgian areas are close to the very highest paid jobs in the West End, City and Docklands financial districts. Don’t expect any big change – London as a financial centre will remain key to UK’s economic fortunes. The City could also get a boost if the Tories get into power in June 2010 – particularly if taxes drop and/or regulation decreases. Other areas of expanding employment, particularly for the higher paid jobs are:

·          Cambridge

·          Oxford

·          Bristol

·          Exeter

·          NW Kent (Ebbsfleet)

·          Southampton

·          Manchester

·          Leeds

Knowledge, finance and technology jobs will become more important – so the areas of Cambridge (M11 corridor), Reading-Maidenhead (M4 corridor) and Southampton-Winchester (M3 corridor) will see more price rises we believe as building levels remain slow to almost non-existent and housing demand increases with more jobs and expanding population.

That’s it. We hope this Special Report has helped frame the importance of Regeneration, Infra-structure developments, Major new projects, Population, Energy scarcity, Baby-boomer wealth and retirement, and Employment. If you have any comments, please do not hesitate to contact us on enquiries@propertyinvesting.net . And please feel free to forward this report particularly to a friends, family or colleagues.

For further Reports on Peak Oil and Resources please click on these links:

·  264: Another oil price spike is just about to hit us...watch out

·  263: Investing in Property with Energy in Mind "post Peak Oil"

·  257: Property investing, the UK economic situation and oil & gas

·  251: Peak Everything !

·  246: Peak Oil - called July 2008 - massive switch needed despite $35/bbl oil

·  244: It's the oil price again - it caused the recession

·  243: Oil price crash sows seed for next massive oil spike

·  242: Oil, Cars & Property - what we'd do if we were UK Prime Minister

·  238: Oil, Cars & Real Estate - what we'd do if we were Pres. Obama

·  191: Oil Price Update and Real Estate

·  187: Real Estate and the commodities super-cycle

·  186: Oil price starts to skyrocket as predicted - how to profit

·  180: Oil prices continue to skyrocket

·  172: Make serious money - best investment sectors

·  169: Oil supply crunch begins… protect yourself

·  168: Alarm bells ringing - oil price shock now on the horizon

·  163: Making Serious Money as asset prices plateau - resources and property

·  161: Resources winners and losers - ranked list for property investors

·  160: Find out the winners and losers in the biggest oil boom in history - about to happen...

·  159: Massive oil boom - the winners and losers - be prepared

·  158: Supply and demand scenarios - oil boom and the property investors insights

·  157: Impact of "Peak Oil" for Property Investment

·  151: Oil price $125 / bbl and rising…how to take advantage in property

·  150: Peak Oil shortly due to be reach - unique insights for a property investor

·  148: Take advantage of the oil/gas/coal boom - key insights