684: Property Investors Update and Importance of Robust Mental Health
As predicted in our Special Report mid October and 1 November, the COVID-19 infections are starting dropping in the UK mid November and the fatality rate has levelled off at around 500 a day. We now expect the fatality rate to start dropping slightly further and the infection rate to continue dropping. The concern is that all the University students and younger people will travel home from the cities for Christmas, families will meet and the infection rate will go shouting back up in January – requiring another Lockdown of sorts. There is a reasonable chance of this third wave happening in some shape or form – at least an increase into January – though this still remains uncertain.
COVID-19 Cases as of 28 Nov 2020
For people investing in property – there are some good things and some bad things that are affecting business. Let’s list these for clarity, but let’s also be clear the rising unemployment and lower GDP is by for the biggest factor moving into 2021. Bad for cities and rural areas alike.
Positive Stimulation for Property Markets
- Expectation of widespread vaccination programmes starting mid Dec 2020 – likely to vaccinate most of the 50-90 year old population by mid Feb 2021
- Record low base rates and lower interest rates
- Massive currency printing supporting banks and continued lending – pumping printed currency into the banks and economy
- Furlough Scheme helping stem unemployment
- Banks helping-supporting distressed home owners
- Pent up demand after the last lockdown
- Realisation by many how important it is to live in a nice house or flat (instead of traveling and spending money socialising in the “COVID times”)
- Stamp duty holiday up to £500,000 until end March 2021
- House prices in some rural and coastal-holiday areas have risen sharply as people plan to work more from home – making lifestyle choices
- Property prices in most provincial areas have risen after the Tories got a clear majority and also promise investment in the north and these areas are also playing catch-up to London – the “ripple effect” moving through
Property prices are likely to rise as general inflation picks up in the next five years (though they may lag general inflation because wage growth is low, unemployment rises and bank borrowing remains difficult)
Negative Stress for Property Markets
- Stamp duty holiday confirmed to be ending 31 March 2021
- First and now second wave of COVID-19 pandemic causing acute economic stress and reducing the ability to perform normal business (e.g. logistics of building, delays in planning and conveyancing)
- Brexit uncertainty – where we leave the EU 31 Dec without a deal – and the transitional issues in 2021
- Likely capital gains tax increases in 2021 to pay for economic damage from COVID-19
- General inflation – rising costs of goods and services as the flood of electronically “printed” Sterling currency swirled around the economy
- Massive increase in unemployment set to continue into 2021
- Low wage growth
- Realisation that many office workers in places like London may only have to work in an office on occasions – hence people have started to move out of London creating likely temporary stress in the London market (this is likely to reverse April 2021 onwards)
- London prices are being depressed by lack of international travel – since London is the “playground of the global rich” – again – this is likely to switch around April 2021 as the summer season kills off COVID-19, more travel gets going
Will There Be Property Prices Crash? There is lots of talk in the media about house prices tanking after the stamp duty holiday ends 31 March 2021. We don’t believe this. Instead we predict that London property prices will stay depressed for 2021 – since the stamp duty holiday effects the mid to higher end of this market significantly. But the stamp duty impact in the north and Midlands is less, so there will be less impact in these regions. In general flat prices in the UK will be depressed whilst house prices will continue to rise – as people with money and jobs look to up-size, get more room for home working and a garden.
London: Looking at a finer scale, at the moment in London, house prices in the suburbs are doing quite well as people move out, up-size from flats and try and get a garden – house prices in Hackney and Bromley with gardens for instance are doing well. But flat prices, particularly those without a balcony or garden area in central London are suffering. This is especially true since less people are working-visiting offices in central London, there is more working from home – and the private sector businesses having taken such a hit, plus international investors are thin on the ground. But this will likely start to change by mid 2021. London is a super global city - very exciting and interesting compare to other UK cities – so when the international investors and second home owners start to arrive in April 2021 after the pandemic and vaccinations – enjoying the benefits of London – we are likely to see support for central London property prices re-appear. In 5 years time, the pandemic will be long forgotten and people will want to mix, socialise, party and have a great time in places like London once more.
What we are saying is – bargains are to be had in central London at this time and by mid 2021, especially those without gardens and balconies - these bargains might start to disappear again. So now is a good time to buy a 1 bedroom flat in South Kensington – you could get a bargain – since for the period March 2020 to say June 2021 – this market is considered less trendy. When the international rich turn up mid 2021 with their hoards of global printed currency – almost free money – they will again want to put that into South Kensington prime real estate – one of the best places on earth to live if there is no pandemic.
Mental Health and Property Investment
There has been far more published and talked about in the last few years on mental health. We have touched on this in previous reports in relation to overall health and how this is so important to becoming a successful property investor. You really need to be in robust health – exercise, eat healthily and not drink in excess, avoid smoking and avoid at all costs taking leisure drugs. I’m sure you have never met a very successful business person that was a drug addict. Leisure drugs will negatively affect your mental health for sure.
We are going to touch on mental health in this Newsletter – though the caveat is – we are not mental health professionals and are views are only from some experiences within the team. We hope they help though - at least get you thinking about a subject that until recently has been considered by many as rather "taboo". There has been some super work done by charities, Prince William, Prince Harry and Prof Green to name a few to raise awareness on this important subject.
Firstly, if you eat healthily, get plenty of exercise, are physically robust and have a good routine, you are far less likely to suffer from mental health problems – or at least notice them. That said, some people have mental health disorders and need treating and/or counselling - even if they are super fit. These might be minor or major depending on the person. If you feel like you have a mental health disorder, its very important to seek help and get at least counselling to try and get to the bottom of it. It could be a phobia, something that happened in your life history, or an underlying mental health chemical or physical disorder.
There are different types of diagnosed conditions – such as bi-polar – which is jumping from extremes of high energy positive euphoria to periods of very deep negative depression and low energy levels. There is autism – which tends to manifest itself in people being very focussed, obsessive, insular and have challenges communicating with others - though these people can often have brilliance in their chosen subject matter - for instance musicians, artists, research scientists. There is general depression, anxiety, stress or a combination of all three. The reason for mentioning these is that – property investing can be a high stress business. Dealing with tenants, builders, planners, banks, estate agents – buying and selling, solicitors. It's really not for the faint hearted. You often need to be "thick skinned". If you have any mental health challenges, its not to say you cant be a successful property investor – and it might even help you overcome your issues – but it's something to bare in mind – since any big problem could tip you over the edge and this would be a business risk. You have to be there working on your property at least part time every week. If you have to take long breaks through mental illness or any other illness your business will suffer.
Sometimes the very best property deals are things that are the most difficult - or mentally challenging and stressful. For instance, having a low cost piece of land with a wooden hut on it, that you want to get planning permission to demolish then build a nice big house then sell it for a profit. The whole process may take four years – and you might be in a “cash sink” of say £300,0000 build costs and ££80,000 land costs until the property is finally built then sold a year later. If your cashflow and income is not robust, this would give you huge stresses and if you have any metal health challenges already – it might tip you over the edge. So be careful choosing what you think you can mentally handle – we are not all built like Elon Musk, Richard Branson or Jeff Buzos.
The other thing to think about is – do you really want to think or consider your mental health too much. It can become an excuse for lack of actions, or poor performance within your work or family environment. It can also get you to think too deeply and worry even more about things – almost like a self-fulfilling prophecy. It's best in our opinion – to try and stay as physically strong as possible – and avoid getting into situations in the first place that could cause a mental meltdown. In a way this is broadly “managing risk”. This might be in your family – trying to make sure no-one has an accident, taking care of your wife and kids – doing nice things with them in your spare time are examples. It also means managing business risk – some key pointer in order to try and avoid a “mental health meltdown” – make sure you:
- Your cashflow is robust and well managed
- Your insurances for fire etc are 100% covered for all properties at all times
- You properly manage and assess planning permissions and regulations to make sure you don’t fall foul of planners, councils and other regulatory authorities
- You are proactive in trying to achieve borrowing at low interest rates
- Your credit score is high – check this regularly
- You keep very good accurate accounts and records for tax purposes and submit on time (in case of audit – challenge etc)
- You only let good tenants into your properties and manage contracts appropriately-carefully
- You sell properties in good markets (when things are going well in the economy) rather than struggling to sell in a down market
- You only use good builders/handymen, good solicitors, good letting agents and good estate agents or sale
If you manage your business risks well – you will sleep better at night – and your mental health will improve or stay strong. If you start getting into free cashflow problems – or legal issues with tenants, councils, planners etc – your stress levels will go shooting up and this can always tip someone into a downward mental spiral, so be careful.
It’s also worth pointing out how important it is to keep your partner/wife happy. Try and bring them along with your property decisions – without having them take over or start micro-managing you – or losing a lot of their or your time. If you can brief your family partner in short bursts as to what you are getting up to – and try and not stress them out – then this will relieve the stress on you and your partnership-marriage. This is absolutely key – because if it becomes unsustainable and you split and/or get a divorce – it’s a mental and economic disaster and that would be enough to send most people into a mental depression for a lengthy period. Keep your wife happy – spend time and effort keeping you partner and kids happy.
Causes of Depression - To Avoid: Finally - many people suffer from depression or mental health issues because of either: 1) financial hardship; 2) bereavement; 3) divorce; or 4) poor physical health. Others might feel "trapped" by the daily grind - or have issues from the past that are unresolved in their minds. One of the worst feelings is one of public humiliation - it could be within a friendship group, family or general public. For instance - being taken to court for breaking the law or causing an accident - then this is reported in the local newspapers - just as an example. It's rather a motherhood statement - but take a look at the list above - and remember these aspects - then try and avoid them. There are concrete actions you can do to avoid almost all of these - it's not just luck. Try and manage your risk and avoid these pitfalls as best possible with your time and resources. If you look at all of these - one can lead to the other - for instance financial hardship can lead to divorce then poor physical health. All the key pillars need to be kept strong.
We hope this Special Report has helped give you insights into the current state of the property market, along with how important robust mental health is for property investors. If you have an queries, please contact us email@example.com