PropertyInvesting.net: Property Investment Special Reports

Bad Combination: We have Trump, Putin and Kim-Jong – what a combination. In World War ii we had Stalin, Hitler and the Japanese Emporer – three mad men. Now we have three new mad men – one particularly mad Jim-Kong who knows all the history of the North Korean hate towards the USA from his father that goes back to the Korean war70 years ago. The previous US Administration did nothing to curtail Kim-Jong – and as soon as he is 90% of the way to developing a viable intercontinental nuclear capability that threatens the USA – the USA highly likely to take him and his capability out. This time don’t expect the USA to seek UN approval for their actions – if they believe there is a major military ever present threat or danger to US soil – they will act unilaterally. The bottom line is – they don’t want Kim-Jong holding Los Angeles or any other US city to ransom. Jim-Jong is not likely to back down. We think the only reason why Trump will meet Jim-Jong is to tell him – face=to-face - if he does not back down and destroy his nuclear missile capability, then the USA will destroy him and his capability first. The meeting will not be about peace – it will be the threat of war. Lets just hope Kim-Jong backs down and/or there is no outbreak of war with North Korea – particularly in view of potential massive numbers of casualties.

Inflation all the way: We have a view that the UK governments – and governments in general - will always print currency and inflate economies – the currency will be worth less but prices will always rise in the UK in the long term and since there will always be shortages of UK supply of properties because building levels run at around 155,000 a year whilst demand needs to be around 330,000 units. As currency is printed – you need to own hard assets – things you can touch and feel like property (bricks and mortar), gold-silver, oil or artwork. People have known this for centuries – don’t expect to retain any wealth if you don’t buy hard assets. Wealthy people use cheap currency – the printed new currency – to purchase hard assets that then normally inflation in price and hence the debt in real terms drops. Western developed economies are in such a state and the levels of debt are so high that the only way to pay the debt back is to print currency and debase the value of the currency. Because the rich own the assets – they are protected. The poor will get poorer because food and services plus rental prices rise. Government try and reduce the impact on poor people by taxing the middle classes at ever increasingly high levels. As long as people own properties – they are normally protected from the ravages of inflation and to a lesser extent taxes – of course the government has massively increased stamp duty and buy-to-let landlord taxes to squeeze back as much as they can, but any more and no-one will want to build any homes – so they need to be careful.

To get wealthy and avoid the ravages of inflation, you need to avoid spending money on expensive holidays, and expensive cars that depreciate fast and “stuff” that is worth less as soon as you buy it. Instead, leveraging up and buying property – then having a positive cashflow and having the tenants help pay the mortgage – is a good strategy in the inflating world we live in in the UK.

Remember the average property price was:
£1500 in 1950
£5000 in 1965
£15000 in 1975
£60000 in 1990
£150000 in 2000
£300000 in 2017

Assets are King: We think property prices will average around £600000 by 2035 – simply because the Bank of England has a target to create inflation and they will always do this by printing currency if it does not happen naturally through business growth. They like to print currency to give the illusion of growth. Hence very long term – even if Labour get into power – as long as the overall economy does not implode long term – then we would expect to see house price inflation. Building costs would rise, all costs and wages would rise – but property prices would have to rise eventually – unless the tax increases were so draconian – in a way like they are in Venezuela – that property prices stayed permanently depressed. But we can’t see the UK population putting up with this for more than 4 years before a Tory government came back into power to clear up the mess again.

Disciplined Spending: So if you ae young and starting out – it is very important to try and stay disciplined with your spending – save as much as possible, avoid expensive holidays, expensive cars – live in cheap rented accommodation and then you will eventually be able to afford to buy a cheap property. Once you own a property – and you need to may be live in not such a nice flat or not such a nice area – you can do the property up – see prices rise then trade up. Many young people “throw the towel in” as soon as they leave college with large debts – and end up living in a nice big flat on their own in a nice area – spending all their money on this and expensive holidays – the complain they will never be able to afford to buy their own homes. Very defeatist. You need to rise above this, and you might also get lucky and find the government scraps student loans – even the Tories may do this to win votes before the next election. Don’t let a student loan get you down – long term – it should not be significant also because inflation will reduce the size.