PropertyInvesting.net: Property Investment Special Reports

188: Jobs - Jobs - Jobs

03-21-2008

PropertyInvesting.net team

 

Forget - Location Location Location - its actually about - Jobs Jobs Jobs.....

 

No matter where you are in the world, property prices normally rise when more wealth is created in an area or invested into an area. For this to happen, there need to be jobs. The more sustainable jobs are private sector jobs, so if you invest in property, its best to focus investment in areas with strong private sector jobs growth. Areas can also include public sector jobs – though any expansion in public sector jobs is often for a limited period only. Private sector jobs growth can go on for decades in a sustainable way.

 

More jobs brings in more people, more wealth and more homes are required – either for rental or purchase. Hence property prices rise and rental demand stays high. Many lower end jobs might be temporary and hence more rental accommodation will be required. Higher end jobs would likely lead to strong demand for property purchase and hence escalating prices. Broadly speaking, if employment of higher wage jobs booms - then property prices will follow. It really doesn’t matter which country you are in, the same applies around the world. For instance, in the USA, even during a property price crash there will be some areas which are hardly affected because of new industries and jobs being created. And even in booming economies such as Russia, there will be some back-waters where property prices are declining because of depopulation and lack of jobs (e.g. some remote cold rural area with no holiday homes or tourism). This is also true of Germany - firm prices in Munich with so many well paid jobs. But depressed prices on the north-eastern German border - depopulation, few jobs, rising unemployment and prices dropping for years. 

 

To get particularly predictable property price performance, you need to research which areas within a region or country have "sweat spots" – towns, cities or areas where new jobs and wealth will be created in the future – where unemployment is dropping and higher wage employment is increasing. Areas with a changing and positive employment outlook.  Examples are:

 

UK

1. Berkshire: Windsor/Slough/Eton/Maidenhead – massive increase in new jobs with the opening of Terminal 5 – plus high tech jobs along the M4 corridor with some new manufacturing jobs in Slough. Infra-structure upgrades are also bringing construction jobs into the area. Meanwhile, few properties are being built. Surely property prices will rise?

2. London: Bow Church – a previously deprived area now regenerating between the City of London (finance jobs growth), Docklands (finance jobs growth) and Stratford (Olympics, construction and leisure jobs growth). It’s difficult to see how prices in Bow would come down in the next 5 years - surely they should rise?.

3. Cornwall: Truro, Falmouth, Hayle, Camborne- Redruth – prices have tripled in ten years, but wealthy middle class people are still arriving from London – many are telecommuting consultants. Rising employment in this previously deprived area and housing shortage cause by almost non existent building is sending prices higher on an ongoing basis. Educated people from all ages looking for a lifestyle change seek out property in this area. The population has risen 25% since 1970 and shows no sign of slowing. Meanwhile not homes are being built! If prices dont continue to increase, we'll be eating our hats!

4. Scotland: Aberdeen (within a 30 mile radius), Stonehaven, Dundee, Montrose, Inverness, Fife, Perth  - the booming oil & gas sector with oil prices having risen ten fold since 1999 has created a jobs boom in Aberdeen. Many workers chose to live in villages and towns outside Aberdeen where the population is increasing faster than any other area in Scotland. Other towns with a knock-on impact from these high paid jobs are Stonehaven, Montrose, Dundee and Fife. As many of the oil workers retire, they will choose to live along the eastern sea-board. The hottest place in Scotland - because of high paid jobs growth. Also watch out for lifestyle movers - an expanding middle class population in Inverness has led to large prices rises - this is expected to conitnue. 

 

USA

1. Miami – with a booming population and new employment, despite the real estate correction of 2007-2008, it’s difficult to see how Miami would not see prices escalating in years to come as babyboomers retire from NE USA and new jobs are created in private services businesses. UK and German retirees settling in southern Florida will also help, plus the booming indigenous population.

2. SW Wyoming Green River – the coal mining boom will continue as oil prices remain high and coal prince skyrocket – expect real estate prices to rise and rentals for workers in towns in the region to skyrocket as employment increases.

3. Texas - Houston-Dallas-Irving-Galveston – a booming population and real estate prices that hardly rose from 1980 to 2000, then ten fold increase in oil prices since 2000 will see real estate prices continue to rise. Employment in energy and refining related businesses remain strong. Ports are also prospering. A good safe place to invest in – with the current sub-prime woes being a good buying opportunity.

 

You need to form a view on which industry will prospect and which will decline. PropertyInvesting.net believes the following industries will boom in the next ten years:

 

• Oil, gas, coal
• Metals and gemstone mining
• Refining
• Electricity
• Water
• Financial services
• Retirement
• Travel/tourism (short distances)
• Manufacturing in low price countries (China, Vietnam)
• Technology (India, USA, UK)
• Retail in developing countries only (India, China)
• Education-Knowledge

 

We would avoid areas where many jobs rely on:

 

• Manufacturing in developed counties
• Public sector
• Retail in developed countries
• Long distance tourism (affected by high oil prices)

 

So in the UK, we suggest avoiding the East Midlands and Newcastle because of a strong reliance on manufacturing and public sector jobs. We suggest gravitating investment towards London where jobs growth prospects are best and public sector employment is lower. Areas which have a strong upward jobs growth profile will benefit the most – examples are:

 

• Gravesend-Northfleet-Southfleet
• London Bow-Stratford-Hackney
• Slough
• City of London
• Peckham-Kennington-New Cross (City proximity and low prices)
• South Bank – E&C - Borough (City and West End proximity and still reasonable prices)
• Aberdeen - high paid oil & gas jobs and wealthy retiring oil workers

 

For other towns and cities, we see good jobs prospects in:

 

• Portsmouth
• Southampton
• Weymouth
• Brighton
• Briston
• Hastings (higher risk, but lower priced)
• Plymouth
• Exeter (high priced, but likely to drift higher - housing shortage and strong jobs growth in once sleepy city)
• St Neots-Cambridge (high tech corridor)

 

In the North, it’s more risky, but Bradford should prosper from proximity to Leeds, Manchester should also be fine, Liverpool is a tough call – can go either way – and Blackpool should do okay from retiring baby boomers. York also looks good, plus Doncaster because of train links to London. We would avoid:

 

• Newcastle (53% public sector employment, more than Hungary before the collapse of Soviet Union) 
• Derby
• Nottingham
• Birmingham
• Leeds (new build at least, albeit financial services are going well)

 

We hope you can see – it’s not rocket science. It’s mostly common sense. We want to communicate simple clear logic to all our customers. That’s one of the great things about property investing – it’s quite simple in principle. It’s possible to make stellar year-on-year returns by following these trends – all leveraged up using other people’s money. And anyone that disagrees, you just have to look at the UK FT100 index which, despite inflation of 2.5% over ten years, has not moved higher in this ten year period! Meanwhile property prices have doubled or tripled and because most investors borrow 70% - they have made ten fold increases in wealth (net worth) through investing in property rather than the very risky stock market!

 

We hope you have found these insights helpful to guide you to high investment returns. If you have any comments, please email us on enquiries@propertyinvesting.net 

 

 

 

 

 

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