565: House Price Boom starting as prediction post Election result
House Prices Taking Off: As predicted mid December, house prices have started to “take off” throughout England and Wales with asking prices up a healthy 2.3% in the month to 20 January 2020. This is no surprize to us in view of the huge relief that Jeremy Corbyn did not become Prime Minister, no Coalition and the Tory party achieved a healthy majority. We can now look forward to five years of relative certainty and stability as the Tory party enacts policies that stimulate the economy and jobs growth. A few key learnings or observations post the 12 Dec 2019 election result are:
• Boris Johnson wants to centralise power into 10 Downing Street
• He wants his Cabinate to focus on delivery rather than their egos, TV appearances, PR and spin
• He wants to repay all the Labour voters that entrusted their vote to the Tory party in the Midlands and North – with investment and jobs boosts – so in five years time, he can hopefully repeat this and achieve another majority
Repaying Northern Voters: A lot of the brains behind this direction likely came from Cummings – who is originally from County Durham – and believes the new right leaning politicians should properly engage with the normal person. Boris Johnson did a superb job at this in the election campaign – he spent most of his time touring on his Battle Bus the North, Midlands, Wales and SW England – he spent very little time in London. This was very popular indeed. Meanwhile Corbyn made the mistake of looking London-centric. Only 10% of the population is in London and he lost huge amounts of votes in the densely populated NW, north and Midlands.
Labour Leadership Contenders: This brings us on to the key long term threat for the Tory party and businesses generally - namely Sir Keir Starmer. His track record is actually pretty abysmal but this does not mean he wont become the new Labour leader. Firstly his time as Head of Public Prosecution that he got his knighthood for culminated in many innocent people like Cliff Richards and Paul Gambichina being accused of child crimes. In politics – he was a disaster as shadow Brexit Secretary – the party flip-flopped and the whole strategy spectacularly back-fired. He is a known firm Remainer - this wont go down well with many Labour supports. In true Labour tradition, this should not harm his chances of getting elected as the new leader. What he has going for him – is very superficial:
• He is good looking and he looks like a Prime Minister
• He sounds quite good and he sounds like a Prime Minister
That’s about it! What many people think is good – which is actually bad – is that he is another male Londoner (like Corbyn). He went to a Grammar School in NW Kent, he’s pretty Middle Class. But for Boris Johnson – it’s likely he would fare the best head-to-head in the next general election in 5 year’s time because his political views are about as left leaning as Ed Miliband – yes he’s left wing but not ridiculously so – dangerously left wing yes, but just about electable if the general public fall for his promises and at the same time fall out of love with Boris Johnson and the Tory party.
Long-Bailey: The other main contender is Long-Bailey – who claims to be a working class Salford lass, another lawyer, is a woman from the north and far more left wing that Starmer. She's considered by many as a rather unknown light-weight Corbynite - being a lawyer probably helps with her argumentation. Her chances of becoming Prime Minister must be very slim indeed, but Labour seem keen to have their first ever woman Leader and the left wing of the party support Long Bailey who has policies that she developed working closely with Jeremy Corbyn. On the face of it – having a smart northern woman as leader could win back many of those lost Tory votes – but the problem is – this candidate is simply not good enough to win an election in our view. Certainly, Jeremy Corbyn wants Long-Bailey to be the next Leader and continue (what he things is his good) work and many unions and activist members agree. If she gets the vote, Boris Johnson won’t need to worry in 5 year’s time – he would easily win an election against Long-Bailey who frankly seems only half as Prime Ministerial as Swinton did – and Swinton lost her seat in parliament along with her leadership of the Lib Dems. As a side comment, we think its incredible it takes 3 months to find a new Labour leader – talk about “stringing it out” – a beauty contest extraordinaire – and a taste of the inefficiencies and egos of a potential future Labour government – they think is good PR, a show-case, but its frankly just boring. Very few people are interested.
Property Investors – The Relevance: The reason why all of this is relevant for hard working property investors – is that we all want a long period of stability preferably with good house price (capital) growth and healthy/high rental yields. This is what we got on 12 December 2019 for 5 years. In early April, if Long Bailey gets the Labour nod, our prediction is you can almost book another 5 years on top as long as Boris Johnson stays around that long, which is most likely. He models himself on Churchill and it looks like he’s in this for the long term. This is all very good news for property investors.
UK Growth Prospects: The IMF recently came forward with their growth prediction – and the UK is predicted to growth faster the mainland Europe in the next few years. As Brexit happens and the dust settles – the amount of inward investment into the UK and London will boom. Remember all the naysayers predicting massive London jobs losses as banks moved overseas? Hardly any staff have been lost – possibly 5% only despite all the turbulence. Once the UK is confirmed as a business friendly low tax haven – in investment should boom and with it London house prices – starting now then taking a further notch up early 2021 once the Trade Deals are signed.
Naysayers Unite: Expect to see the same continued bunch of naysayers predicting crisis in trade talks, another final Hard Brexit and recession – but they will be wrong again. Our view is that the UK economy is now on an upward trajectory having unshackled itself from Corbyn, Swinton and Sturgeon – and many of the elite political Remainers are still in denial. The economy will pick up a head of steam – culminating in a boom starting once the final EU Brexit trade deals are signed. The US/EU/UK/Asian banks will stay put now that Labour are no longer on the attack. International investors will start to flood in – now the negative rhetoric has ended on anyone who earns more than Corbyn.
On Infrastructure – we rather think HS2 will be cancelled. The reasons are:
- The economic rational is not strong
- It only serves small parts of the north
- Crossrail is delayed and way over budget – the Tory party wont want to get involved in a disastrous huge project
Infra-structure Improvements: Instead, our prediction is the $100 billion will be used instead to upgrade the existing railway network in the Midlands and North – speed up train times, improve services. Its likely there are some smaller project that can link existing railways lines are create huge wins - for example – linking The Eurostar line to a line running north near Stratford/St Pancras – so northerners can get direct trains to the continent (instead of changing and getting connections in London). Some of the money might also be re-directed into the NHS which should win the Tories votes in the Midlands and North again.
Young Investors: For young investors, if you get consumed by the media – both mainstream and social media – you would be forgiven for thinking the world was not just about to end – all the negative gloomy stories. If you look at some statistics though – you will find there is less famine and less deaths in wars now than at any time in the last 100 years. Think back just a few decades and there were millions dying in Iran/Iraq war (1980s-1990s), Vietnam, Burundi-Rwanda (genocide), Serbia (genocide), Liberia, Uganda, Sudan etc. Things are extremely calm compared to decades ago. Just 25 years agio there was genocide in Europe with a massive war in Serbia, Croatia. Millions dies in Rwanda as the UN sat and watched – this simply does not and most people think it would not be allowed to happen today. Despite all the gloom, the murder rate in the USA is lower now than in the 1980s and 1990s.
Climate Change: Okay – there is a so called “climate change crisis” ongoing – our view on this is:
The population of the world has risen from 3.5 billion to 7 billion in the last 40 years – man made alterations to the environment in the form of big coast cities and the destruction of half of the rain forecast are taking their toll. However, pollution levels are dropping because more dirty bituminous coal burning power plants are closing down.
The following things cause the world to heat:
- Cutting down equatorial forests/woods
- Burning of fossil fuels that create C02 and increase levels of methane levels in the atmosphere
- Aerosols causing a hole in the ozone layer up until 2000 (when they were banned)
- Planting forests in ice bound areas (causing arctic areas to heat since dark trees absorb heat)
- Permafrost and ancient ice bound bogs that thaw – causing trapped methane to be emitted into the environment
- Cars, engines, air conditioner, heating systems and homes-office – that cause warming in densely populated cities (for example, typical Central London (Mayfair) is 2 deg C warmer than on the outskirts of London if there is not win)
- Cattle that belch and fart methane (note methane is around ten times more warming than carbon monoxide
- Intensive farming that displaces forest
- Climatic cycles (ice ages, warmer pluvial periods) – solar/sun activity and cycles
The follow things cause the world to cool down:
- Global dimming that is caused by coal burning power plants that spew out particulate pollution
- Global dimming that is caused by airline trails (ice particles in the sky, note – the USA heated up 1 deg C after all planes were grounded by 9/11 demonstrating absolute scientific proof airline trails are important in cooling the earth)
- Large scale volcanic eruptions that spew out ash high into the atmosphere
- Planting of trees and forests in all areas apart from mainly snow/ice bound areas in the world
- Preserving peat bogs that keep carbon locked in – and prevent methane being emitted
- Dimming caused by the burning of bush areas and forests (temporary effect)
- Climatic cycles (ice ages, pluvial periods) – solar/sun activities and cycles
- Particulate pollution from vehicles - particularly diesel cars-trucks etc (plus gasoline) that block out the sun causing cooling
Germany Struggling to Reduce CO2 Emissions - USA Delivers: I will find it difficult to believe – but the country with the biggest increase in CO2 emissions in the period 2008 to 2016 was actually Germany! Yes, they decided to close down all their nuclear power plants and switch to coal instead – crazy. All the time making big noised bout their environment credentials. And you would never guess it – but the biggest reducer in this period was the USA– the biggest reducer of CO2 emissions was the USA. And the reason – again – you’d never believe it. It was caused by shale oil fraccing. Yes – this gave plentiful cheap gas that led to all the coal burning power plants being closed down. This was despite all of Obama’s regulations. Let the market get on with it is the learning. Let the politician control – then you see increases in CO2 emissions with this example. Of course the environmentalists are desperate to stop oil shale fraccing – but it’s the thing that helps reduce CO2 emissions the most. Its ironic that Germany signed up to Kyoto and the USA did not. Add to this the latest forecast that should in 2020 and 2021 the USA CO2 emissions dropping by 2% and 1.5% annually – respectively – whilst their renewable energy rises from 17% to 22%. This despite a torrent of negative press from the neo-liberal European elite.
The point we would like to make is – there are so many variables in this climate change argument – but the scientists and politicians collectively latched onto the overriding criticality of CO2 emissions. But we simple don’t buy this argument. Climate change is a summation of so many things created by mankind and natural events as well. It does however seem almost certain that the world is warming overall – in a general sense – and this is most likely caused by man-made activity.
The bottom line is – the worlds population is set to increase 9-10 billion before it plateaus – there will be billions of new lives – but the climate will change because of it. To go back to the dark ages means millions will die from pore health (no power, hospitals etc). The 700 million wealthy westerners are trying to the other 6.3 billion people in the developing world to stop power-growth-wealth creation – stop travelling, building homes, driving cars, building schools and hospitals. It simple does not stack up. The privileges few telling the developing many to stop their emissions.
UK Context: Back to earth – and the UK – as a reader, you are one person. As the UK we are 60 million people. That’s 0.8% of the world’s population. We have a life. Only one life. Try and not take onto your broad shoulders the issues of the 7 billion people – particularly if you are not a global “influencer” – you don’t get invited to Davos. You cannot realistically control what is happening. You have yourself, your family and your friends. Don’t let them and it – get you down. Because reading all the press is enough to make lots of people that get affected by such media coverage – enough to top themselves, end it all. We should be thinking positively – people are ingenious and use incredible technology to solve issues. Anyone that has flown around the world should realise just how much of the earth is desert – and how big earth is. Australia is bigger than the USA and Europe for example. The is plenty of room for more people in our view. Most people on earth still live within 50 miles of the coast.
Climate Monitoring Website: If you are really interested in the climate, have the time, then check out this website. www.ventusky.com - on 20 January, Florida was -1 deg C, central Greenland and Siberia were -40 deg C - its been particularly cold in Artic areas this year. Newfoundland – which is further south than France – was -20 deg C. In the winter, the UK is blessed with warm SE winds that blow almost all year round from the Caribbean. It’s 7 deg C in NW Scotland whilst it’s -30 deg C in Canada on the same latitude. Australia has cooled down recently as well - along much of the southern coasts its ~18 deg C. You can track the wind, cool-warm, sow, ice – it’s fascinating – enjoy. And you can check out just how cold it gets in some countries - and how hot north Africa and the Middle East get in the northern hemisphere summer - the Algerian desert often gets above 46 deg C by the end of July.
Think Locally for Healthier Life and Private Enterprize: Finally – back to property investing. The point we would like to make is – its very healthy to stay focussed on your local environment – family and friends. If you start to get consumed by global events and feel guilt about being a privileged western – then you may never enjoy your life. The point being – that all through history, people have always valued having a home. A nice home to live in. This has never changed. Your home is a simple human instinct and important thing. So if you invest in property – or homes – you almost certainly wont find it completely “goes out of fashion”. Investment fads come and go – for instance the: Dotcom boom-bust; oil boom-bust; mining boom-bust; banking boom-bust – but homes cannot be replaced by technology, everyone needs a home to live in and the world’s population is booming in most countries. So you just have to get into a city or area with booming population, booming jobs and lack of housing supply to see prices rising sharply. Which is why longer term London and cities close to London and parts of the Midlands and North of England will see prices continue to rise in decades to come. Its best to stay wise to this when you are young in your 20s – and not start thinking about it when you are 40 – because it might be too late by then. As government continue to create inflation by devaluing currencies and printing currencies – a house will always stay a house, but the price should continue to rise as the real value of the debt reduces – meaning equity rises.
We hope this Newsletter has given you some interesting insights and perspective. If you have any queries, please contact us on