Property Investment insights
07-06-2015
PropertyInvesting.net team
2: High Performance Individual Investors
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The UK Has Chosen: There was a stark choice for UK voters on 7 May. It was either a vote for Labour supported by the Scottish Nationalists or the Conservatives – more relative financial stability, growth and a continuation of a viable economic recovery. The UK gave the Conservatives a clear mandate with a majority government to continue their work with the Tories winning seats compared to 2010 and Labour losing seats.
Wider Implications: The wider implications of this particular election are profound for property investors. Let us explain.
Old Labour: Firstly, knowledgeable political analysts have always known that without Labour’s Scottish votes, the UK would be overwhelmingly Tory, as long as he Tory economic delivery was acceptable - this would be likely under normal circumstances. The ~54 seat Labour held until this year were always enough 
to give it about a 50% chance of swinging the UK parliament into a Labour minority or Labour majority government. Furthermore the “New Labour” centrist government sometimes looked more right leaning than left leaning and this captured the middle ground from 1997 to 2008 - it was very popular also with business. How things have changed. After Blair left, Labour started a mild lurch to the left under Brown – then this accelerated under Miliband in 2010 - voted in as leader ahead of his “New Labour” brother David Miliband by the Unions. The UK and Scotland rejected Ed Miliband's populist left wing and directionally anti-business policies and the threat of hooking up with the First Minister for Scotland Nicola Surgeon with her deputy Alex Salmond - who lost his Referendum only six months earlier and resurfaced to lead the nationalist charge in Westminster. Only 1.4 million Scottish voters - with their 56 seats won. Meanwhile in England and Wales, 3.9 million UKIP voters achieved 1 seat, 2.42 million LibDem voters won 8 seats and 1.2 million Green voters won only 1 seat. The hugely disproportionate representation of the Scottish National Party in Westminster could upset the rest of the UK and it only seems a matter of time before the rest of the UK allows them to have another Referendum and a vote for f
ull devolution – they are likely to be a thorn in the side of all UK political parties and be given disproportionate attention considering they represent only 1.45 million voters/people of the 60 million UK population.
Party Seats Million %
Conservative 331 11.33 36.9
Labour 232 9.35 30.4
Scottish National Party 56 1.45 4.7
Liberal Democrat 8 2.42 7.9
UKIP 1 3.88 12.6
Green Party 1 1.16 3.8
Base Case Prediction: Looking forwards, firstly we cannot see any charismatic Labour leadership material at this time, certainly they have no one of the calibre that Tony Blair (albeit acknowledging with all of his faults) was in 1995 when he built "New Labour" up from the ashes of a broken Union led party in the early 1990s and lead the destruction of union power in the Labour party and outside. We now predict that:
· The Scottish Nationalists will continue to be a strong party and keep Labou
r out of Scotland – Labour is a spent force in Scotland
· Because of this, Labour will never be able to command a majority in a UK government henceforth
· Because the Liberal Democrats have been destroyed in all parts of the UK, this will help the Tories keep labour out of power moving forwards
· We see UKIP in decline in part because of in-fighting and lack of coordination and think the Tories will capture back a lot of these disaffected voters – with only one seat in parliament they will not be a major force albeit they may grab back a few seats in by elections - this is their biggest hope.
For the property investors in England, Wales and Northern Ireland, this outcome is firstly hugely important and secondly hugely beneficial as a back-drop to allowing decent returns to be made on investment and financial stability with strong growing markets for both rentals, sales, asset price increases and yields.
House price predictions based on Tory or Labour victory - made end Dec 2014
Policies: It was also very important the Tories were able to achieve a majority that will mean the Scottish National Party cannot start to dictate the agenda in Westminster. The initially leaderless Labour, LibDem and UKIP parties will find it difficult to block Tory budgets and policies. So we will get:
· Pro-business policies
· Lower interest rates
· Stronger sterling
· Lower inflation
· Higher employment
· Low wage growth
· More immigration
· Moderate levels of building
· Continued lack of home supply due to planning-environment and "nimby" factors
· Rising rental prices
· Rising house prices
· Rising land prices
Property Prices Rippling Out and Up: The "ripple effect" from the booming property prices in London will feed through to all places in England, Wales and start to affect Northern Ireland. Its likely property price growth in Scotland will grind to a halt because the Scottish Nationalist movement that is creating uncertainty for investors and home-owners, hence inward investment will be weaker. Also the oil price crash from $110 to $60/bbl will affect NE Scotland and this will rippled through to the rest of Scotland as deficits widen. The outlook for full independence seems more likely now and this will affect property prices we believe in the period 2015-2017.
London: In London, its good news all the way – partly because:
· The Mansion Tax will become a thing of the past – dropped completely from agendas now the LibDems are no longer part of the presiding government (it was their idea driven by Vince Cable that was then hi-jacked by Labour).
· The Non Dom status will be retained – this is hugely significant because the super-rich will continue to come to London in droves to set up businesses, employ vast amounts of workers and continue to drive economic growth in SE England that will further boost prosperity in England and Wales – some of this will filter through to Northern Ireland and Scotland in the form of public sector spending from high tax revenues built through economic growth.
· Income taxes will not be raised to 50%, instead they will either be kept at 45% or dropped to 40% in the next five years – this will stimulate growth in London in particular and the rest of the UK
· The continued mismatch between population growth, housing supply and employment growth will continue to drive up property prices in London. The safe haven status of London is retained and we expect London top end property prices to rise sharply by about 20% in the next two years – a strong relief rally after Labour’s failed attempt to gain power and tax aspirational people.
Labour Highly Likely Would Have Created a Financial and Constitutional Crisis: As we advised earlier this year in our Special Reports, it was a simple question of divestment (or at best a holding pattern) if Labour achieved power, versus a foot on the accelerator for property investment if the Tories retained power. This outcome is even more positive than anyone expected since Labour appear to be a spent force because the Scottish Nationalist will always keep them out of power, and Nicola Surgeon’s far left strategy has back-fired by getting the Tories back into power with a majority government that does not need her backing to get policy through. No wander despite winning all but two of the Scottish seats, she did not appear to be that happy on May 8 in interviews. It’s worth reminding everyone she does not have a seat or office at Westminster, she is unelected and not part of our UK parliament, so David Cameron won’t need to see her on a day to day basis.
Interesting map showing the correlation of old Coalfield with Labour seats won at the 2015 Election (acknowledgement: Jonathan Dando on Twitter).
It seems highly likely that because the UK population are very intelligent indeed and know what’s going on, they reacted strongly to the threat of the 1.4 million Scottish Nationalists telling the rest of the 58.5 million people what to do – which then put David Cameron in number 10 once more. Apart from London, interestingly the remaining Labour seats in England and Wales seem to correlate strongly with the traditional old coal mining areas - almost all of which have since shut-down.
Southerners: Specifically in Scotland, people seemed to react strongly to something no-one ever talks about – namely Ed Miliband and Ed Ball were two southern OxBridge educated politicians from London that rarely visited Scotland and did not represent Scottish Labour interests (unlikely Gordon Brown, Tony Blair, Alistair Campbell etc). This became evident when Ed Balls lost his Leeds seat – voters said they never saw him and he did not represent the Yorkshire interests.
EU: The big unknowns now are what sort of deal the UK will get from the EU and whether there will be a referendum (likely) and what it will be exactly for on the EU. This is important because the big banks want to remain in the EU but not be overly regulated by them – something Osborne and Cameron will be well aware of. They don’t want HSBC and other banks moving their HQs – with the jobs losses that would ensure.
Trident and Scotland: Also – the Tories will probably want Scotland to stay in the Union – despite this potentially keeping them out of power as was seen in their canvassing with labour for the Referendum, but if the pressure build even further and this affects the financial-economic-security-stability, they and the rest of the UK may eventually want to jettison Scotland – allow them to go it alone – particularly if they block Trident. The Scottish would then take their debts and deficits with them and make their own choices – and they may not quality to be in the EU because of the high deficits. Certainly it’s been a major issue the threat of the Scottish Nationalist blocking Trident, especially given Russia’s continued threat (e.g. flying military planes unannounced into UK air space and sailing nuclear submarines into our water around our coast).
Open For Business: Moving forwards, broadly speaking expect the following policies and outcomes from t
he Tories:
· lowering taxation
· reduced regulation
· decreasing deficits and public sector spending with smaller government
· continued implementation of pro-business policies
· slight reduction in the size of government and public sector
· low borrowing costs
· strong sterling
· strong financial markets
· booming services sector in London
· continued high levels or immigration
· challenge to EU rules and regulations, particularly those affecting the financial sector
· pro-property ownership policies
· pro-landlord and policies
· pro-private sector home building policies in developing areas
· lower unemployment, higher employment
· lower public sector spending
· lower social security payments and spending
Outcome: The outcome will be the UK growing at an even faster pace that other G7 countries, likely to be the fastest growing G7 country in the next few years, also boosted by the lower oil prices and low oil import costs.
Finally – for all property investors – what a relief that sense has prevailed and a far left socialist government is not running the UK now.
2: High Performance Individual Investors
Lifestyle: If you want to make serious money and have a sustainable lifestyle, you have to start from the fundamentals. It’s possible to be fabulously wealthy from being in business in any sector, but there are few things that really help – that might seem obvious but are worth mentioning all the same. 
If you want a successful business – it’s best:
· You are obsessed by it and love it
· You have a natural affinity to it – are skilled and knowledgeable in it
· You like working hard in the area of business
· You are good at the business – helped by the above
· You stay healthy
· You are focussed, efficient and effective – good at managing
Love It: If you love it and are skilled at it, you will almost certainly be good at it – regardless of what “it” is. You’ll notice this if you meet property investors – they are normally very enthusiastic about what they do, they love properties, and making money from properties – they get a kick out of this. That’s why when you get the bug, it’s so easy to work hard and be enthusiastic – and normally the wealth follows just behind.
Discipline: It’s important of course to be very disciplined – to manage your time very effectively. If you are good at paperwork, finance and have a good eye for properties where value can
easily be added, you’ll normally be a good and successful property investor. If you pride yourself in not wasting money, making high returns and providing an honest service to tenants and fellow investors, you’ll probably also do very well.
It’s critical to be and stay healthy. This sounds like motherhood and apple pie, but if you have poor health, it’s very difficult to make money – you’ll end up losing it. No health no wealth - when it comes to property investing.
Exercise: We have this theory that – if you exercise 60 mins a day – it will add 3 hours to your life for every hour spent exercising. So it creates a lot of life and value – as long as you don’t injure yourself or have an accident. Fit healthy slim people live long. If you are unfit, smoke, drink, don’t get exercise and are overweight or obese, you’ll probably live 15-20 years less long. That’s a heck of a lot of life – time and in that time you can be making serious money of course and spending it and enjoying it. If you stay healthy when you are 80 years old, there is absolutely no reason why you cannot continue to make serious money – look at Warren Buffett for example. Old age has not slowed his returns.
Dump the Car: It’s important to try and lead a healthy lifestyle. Consider this – the average person spends about 2 hours a day in the car – in a very stressful and very dangerous and polluting environment. Bombing around in a one ton car at speeds up to 70 mph – no wander people that drive a lot feel stressed out, tired and their performance suffers – work wise and financially. Best to try a
nd dump the car as much as possible. Walk, cycle, catch the train, bus or tube, run – try and get away from the crazy car – and you might all of a sudden find you save masses of money, get very fit, save lots of time (no traffic jams, you can work or relax on the train) and your overall quality of life will improve. For some strange reason, many people choose to travel colossal distances to work – it’s almost like a daily challenge on top of everything else – it’s crazy. Everyone bombing around busy roads risking their lives and getting totally polluted and stressed out – then spending all weekend recovering (or jumping in the car to visit relatives and friends to make matters worse).
No to travel: So consider say – NO – to trips to see family and friends that involve huge car travel distances. Ask people to come and visit you instead. Try and go on holiday on the train hire some bikes, get some fresh air and enjoy life. Dump the car! It’s so much easier these days now that the internet and mobile phones allow remote communications. You can do business almost anywhere – and contact people remotely – you don’t need to bomb around in the car anymore – and try and avoid all those supposedly important face-to-face meetings. It’s probably better using your time to making phone calls and sending emails – far healthier as well.
Walk: Try and take any opportunity to walk, jog or cycle somewhere – it’s often a lot faster. As an example, if you live in West London, it normally takes ten minutes to find a car parking slot, costs huge amounts and is stressful. Better to walk to the tube get away from the road pollution.
Stay Married: Consider this – probably the single biggest wealth destroyer is divorce. The problem is, before most people have a fling then file for divorce, it never even crosses their minds. Until the divorce lawyers come out of the woodwork – if you cheat (if you are a dishonest cheat), then a
re caught – you will be taken to the cleaners. You’ll lose your house, then half your wealth or more on top, then have to pay maintenance – a large part of your future cash-flow. With tax, legal costs and other cost like getting another house to live in – you will almost certainly lose 65+% of your wealth overnight. It will be very difficult for you to recover from this – it’s quite possible this will tip you into bankruptcy or close to it – end up on social support or living in a bed-sit. No kidding, just do the calculations – everyone will want to take you to the cleaners – ex-partner, kids, family, government, schools, lawyers – you will be the cheat that was caught. Don’t do it! It’s not worth it! It’s stupid! On the whole, most millionaires are happily married (or single and have never been divorced). If you are a divorcee of cause it’s possible to rebound especially if you are fabulously wealthy already, but it will be so much more difficult after being shot down. It will likely lead to huge amounts of stress, time wasted, lack of focus, poorer health both physical and mental and set you back a lot. You might lose your new partner – they won’t like this losing streak. If you are happily married – best stay that way. If you are divorced, you may have got away lightly or you may recognise some or all of these risks above. You need to try and treat your life like a business – use you time effectively, be disciplined, make sure you enjoy life but don’t throw everything away by destructive elements – e.g. drink, drugs, smoking, divorce or cheating on your partner. Try and stay in control of your life. If you’re not convinced, then try and find examples of:
· an exceptionally wealthy alcoholic whose business is doing remarkably well
· a business person with fabulous wealth that has a double digit growth company a few years after a divorce
Drugs and Destruction: Okay, there are a few drug taking alcoholic rocks stars and artists around – but they don’t normally last very long, and the most successful have been clean for y
ears (Mick Jagger, Sting, Paul McCartney, David Bowie, Bon Jovi, Bono, Bob Geldof). The ones that died generally took drugs – Michael Jackson, Elvis, Keith Moon, Kurt Kobain, Amy Winehouse, Whitney Houston, Jim Morrison. If you want to halve your expected life, then drugs are a pretty good way to make it happen. It seems that trying to come off them then overdosing at age 27 is a common way for these stars to go. Very sad indeed. If you want to destroy a business, alcohol is a pretty easy way of doing it – most people can’t think straight after drinking – they have the illusion they are doing great things – when in fact, it’s normally far from the case particularly if money, relationships, negotiations and money are involved. Deluded grandeur. Drugs are even more dangerous normally – they alter your mind and not just temporarily – for good. This is why people that have taken drugs will always be fighting to stay off them and their minds are altered and challenged.
Think Positive: If you want to succeed in business, it’s critically important to have a positive frame of mind. It will reduce your stress levels, embolden you to action tricky things and
give your motivation a boost. It will boost for self confidence and self esteem. Try and avoid negative people and commentary – try to gravitate towards positive people, images and thoughts. Try and not watch too much TV and news – its mostly negative – scare stories. The news is full on fear stories that are designed to keep you captured, returning to watch adverts and more fear and shock. Not good for yourself or your family/children. Best to concentrate if you do watch TV on positive programmes and films or programmes that you can learn from and that will help you in your business, lifestyle and management of these. Whenever you get worried about an issue – try and tackle it head-on – action it. Don’t leave it to fester. It will only get worse. Try and be pro-active at all times and look to manage your risks but continue to think positive and be positive to people around you. As they say, its amazing the positive outcomes that will come from giving and helping other people with a good service – and having a positive outlook. If you always sound worried and stressed out and negative – people simply won’t want to do business with you. They will go somewhere else – whether this is a tenant, supplier, customer, letting agent or building/handy-man – if you treat people badly with lack of respect or are negative to people, you’ll struggle with business.
We hope this Special Report is helpful as part of your property investing toolkit and provides some interesting perspective - has helped stimulate some positive thoughts on how to improve your business. If you have any queried, please contact us on enquiries@propertyinvesting.net .