I often hear complaints about the baby boomers and the golden generation that they have had; strong house price growth, no university tuition fees and booming stock markets. However, as a millennial I don’t buy it, and I think we also have had, and will have a great time… yes I am writing this in lockdown at the moment! But I am confident this will pass and in the long term we will return to great times.
At the time of writing, we have seen 10 years of record low interest rates, due to the coronavirus pandemic we are currently looking at Bank of England interest rates of 0.1%, yes 0.1%! House prices have been on the rise for ever since I can remember and our parents and grandparents can boast of house prices down in the low thousands. However, they also can tell you of times in the 1980’s when interest rates rose to over 15%, not far off credit card interest rates today! So it does seem like a catch 22- for them, the house prices would have been more affordable but the day-to-day, month-to-month mortgage cost would have been proportionately higher, a mortgage on a £35,000 house today may not sound a lot but you must remember they were earning a lot less. Today we are almost facing the opposite scenario, the house prices are high yet the banks are providing mortgages to first time buyers from between 1.5% to 2.5% (link). When you factor in inflation, the cost of the money in interest is merely matching (or even undercutting) the sort of inflation we have seen on average in the last hundred years (3%). As much as the higher prices can make it challenging for a millenial like me to get on the housing ladder, once you are on, things start to turn in your favour.
The next blessing we have as millenials is the internet, now I don’t see much value in my telling you how wonderful the internet is, whilst we are all sat working from home due to the Coronavirus, but I can link this to property. Initially, if it wasn’t for the internet I think our economy would have taken an even greater hit than it has, quite incredibly there is still a lot going on to help maintain the economy (as I am sat in my office at home teaching my students who are based currently in Bulgaria, Kazakhstan, Russia, Hong Kong and France… to name a few places). Due to the internet, our economy has been able to ‘hibernate’ a lot more effectively which should help to reduce the impact of a recession, which should in turn help to reduce the negative effect on property prices- this is not a benefit prior generations would have had in unprecedented times like these. I am, however, focusing too much on the here and now. The internet has played already played a big part in property investing.
Previously high paying jobs were generally focused around big cities, certainly in the UK the majority of the high earners were London based. However, with the internet, many people can work from home or commute longer distances whilst working en-route and as a result not have to be in the office for as many hours. From a property perspective, this can mean that you can work in a city that provides higher wages yet benefit from living in a location that has a cheaper (more affordable) property price. This is certainly not something our predecessors could have dreamed of.
This is only half the story with the internet for property investors of our generation. I now do all my banking online, with an accountant I have never met in person, with a solicitor based 2 hours away from me (and have not met in person), a broker I have never met in person, buying a property I have never physically viewed that was sourced for me with a contact I have met via a property forum. It probably all seems a bit mad. I do, however, conduct due diligence around these people- online and on the phone of course! All this whilst my Dad (a 70 year old property investor) is hammering his office trying to find sheets of paper and relying on the post to complete his next deal!
I don’t think it would be fair to say that our transport network is not the finished article, however, I am a fan of a train and do/ have used the train often. As transport networks improve (potentially Cross Rail and HS2) then commuting becomes easier. To add to that, the increased reliability of cars has meant that more people are willing to commute. Our generation does appear to be far more foot loose; as I mentioned in last week’s blog (here), demographics have changed, no longer do we work for one company in one location for our whole life. People no longer look at their immediate area for work, according to the independent the average commute is now 59 minutes, the higher end being for Londoners. This means that our generation are benefitting from areas offering higher wages yet are living in areas with lower property price. A classic example I have experienced is a tenant of mine in Swindon who commutes to Reading. Reading’s wages are far higher than Swindon, he lives in a flat next to the station (I bought the flat for £101,000 in 2016) and can get to Reading in 30 minutes.
Mortgages are still a major source of finance for property investors and arguably for some time, were one of the only sources of finances available. Now-a-days, there is far greater access to loans- I have taken a couple of loans out before to fund refurbishments and this was done with the click of a button and the money arrived with me in minutes, something my Dad could only dream of (as I hear going mad down the phone as he is on hold for another hour!) But these loans are only the beginning, thanks to the internet we have more lending options than before: With Peer 2 Peer lending (P2P is an example of a loan I used recently), the rates were low and the cash arrived instantly. Not only this, but these services all come with apps so I can monitor what I owe, when it goes and make alterations to my agreement (e.g. payment dates) all online, and done within minutes.
The final section is one that I could not miss out, it is education. Never before has there been so many opportunities for you to be able to educate yourself; youtube, social media, webinars, forums, online books and podcasts to name a few. Never before have we been able to learn from other people’s experiences and be given tips on how to solve problems. Only last week, I had a problem of how to get a Personal Guarantee signed off in person by a solicitor. After posting on the Property Tribes forum, someone put me in contact with a solicitor who was 80% cheaper, based in Hull and would be willing to sign off the documents over Skype! Going forward this will save me a lot of time and hundreds, if not thousands of pounds.This was all of course to purchase a property in area that I had been tipped off about by some experienced investors sharing their hot spots on a Youtube video. As I have now realised, education is key and can help you be a far more successful investor. There is of course a mixed bag of resources and providers out there, but I will give you a list below of the ones I recommend.
Property Hub (all platforms)
This one went on a bit longer than I anticipated, however, as millennials and Generation Z (so my students tell me they are) we really do have a lot to look forward to. The opportunities are still there, they are just not what they used to be, but that is a sign of progress. The successful entrepreneurs notice these opportunities, take risks, some they win, some they lose, but over the course of time you will find that you learn from the losses and turn them into wins.
Linked in: Paddy Horsington