Video Transcription:
Immanuel Ezekiel:
Hi, it's Immanuel Ezekiel from Broadwing Homes, I'm today with Brett Alegre-Wood from Gladfish.
Brett Alegre-Wood:
Cool, and we just thought we'd have a bit of a chat about some topical issues, which I'm sure lots of investors are worried about right now, which is coronavirus, COVID-19. The fun and games of what was the beautiful start to a year, perfect start to the year as Trump might say, and obviously now it's turning into a bit of a fun and games and nobody knows what to think. So we thought we'd just straighten it out from our, I guess, well over 20 experience in the property market. Seriously, I haven't been through one of these before. I've been through SARS, but SARS was a very Asian focused thing, not necessarily worldwide. I think this is worldwide. So do you want to kick it off, what are your thoughts?
Immanuel Ezekiel:
Yeah, I think history has shown us that every 5, 10, 15 years, you're going to get a worldwide issue that the whole world tends to panic about, and the stock market, especially over the last few days, has shown that. That when people don't understand what's going on, panic sets in and they start doing really stupid things, and there's no rhyme or reason.
Brett Alegre-Wood:
Like hunt for toilet paper.
Immanuel Ezekiel:
Yeah, hunting for toilet paper. Why would the stock market drop 20% when the fundamentals that have got them to where they are still exist? One of the reasons why I'm invested so heavily in property and have been for so many years is you don't have the same kind of fiasco of property dropping overnight, 10, 15, 20%. That's because stocks and shares, they're disposable assets that can be actually bought and sold very, very quickly. Whereas property, if you hold them for the longterm and you're holding them for income, they're not so liquid so they don't tend to fluctuate in the same area.
Immanuel Ezekiel:
When you have these kind of sentiments in the market, it creates unbelievable opportunity if you know how to take advantage of bad news, and most people tend to make more money in a downward market than they do in an upward market.
Brett Alegre-Wood:
Yeah, and mentioning downward, I don't think we're necessarily into a downward market, and certainly for the UK, we've had Brexit. We've had political uncertainty, we've had Brexit, everything's been suppressed in the market, and yes, certain areas have done well, but the reality is that I don't think this is necessarily the downturn that everyone is talking about. Yes, from a share market, absolutely. If you've got shares, you've lost 10, 20%, who knows, in the last couple of weeks, which would have been devastating if you've pulled out, if you've pulled out at the bottom. But I think the reality with the property market is it is a lot slower, and so you can predict where things are going, and I think the fundamentals for me haven't changed.
Brett Alegre-Wood:
We've been very bullish on the property market, but not necessarily the whole property market, because I've been talking for a long time about not really, a lot of towns and places with small populations and very little investment, we haven't been touching. Our focus in preparation not for this, but for the inevitable recession when it comes, has been to go after the best fundamentals, and when you go after the best fundamentals you tend to ride these. And yes, you may have a drop, but you'll find that it bounces back pretty quickly. I think really with the COVID, is you've got to take out what is hype and what is fear mongering.
Immanuel Ezekiel:
And what's real.
Brett Alegre-Wood:
Yeah, and what's real, and I think part of the hype and fear mongering is the news and the media. They are playing this for all it's worth, and to some degree that's their job, in order to sell newspaper and sell column inches, but that is not reflective upon the property market that underpins all that.
Immanuel Ezekiel:
Yeah, newspapers sell bad news. Nobody wants to know there's going to be good weather tomorrow, they want to know when it's raining, there's snow, there's hail, whether you can get to work or not. Bad news unfortunately sells more than actually good news, and as an investor, I want to take advantage of opportunities that present themselves, and when the market is like this it's going to present many opportunities. One, in terms of the stock market, it will recover, we just don't know when, but if it's dropped 20% in the last few weeks, it's likely to recover. I was once told this comment, which has held fast with me for a long time. If there was once no problem and now there is a problem, at some point there'll be no problem again. And that's how you take advantage of opportunity.
Immanuel Ezekiel:
Those are the fundamentals of investors. They look at patterns, they look at history, and then you can start to ride those patterns, predict those patters, especially in property. If you invest for the longterm, it doesn't matter whether property goes up, whether it goes downwards, whether it goes sideways. If you invest for income, that will always be there, and there's ways to actually protect yourself and make sure you have a longterm investment regardless of what happens to the market over a short or medium term.
Brett Alegre-Wood:
I think what we're not saying is we're not saying that COVID doesn't exist and it's not an existential crisis and all this sort of stuff. It is to a certain degree. I think statistically, you're more likely to die of the flu than you are to actually die of COVID, so there's an element of that, which is why we say the fear mongering is not necessarily warranted as it is. But the other side of it is, is the way you should combat that, which is what most health professionals are saying now, is wash your hands more often, don't cough, or don't go out if you're sick and things like this. Which actually, that side of it, but the problem is we always look to the future and think what's the worst case scenario, and the media helps us clarify that thinking.
Brett Alegre-Wood:
But that has nothing to do with real property, except for the fact that if people don't go out and people don't go on viewings and things like that, yes, we may see a drop in prices. We're even saying that prices won't drop and things won't happen as a result of this, but what we're saying is the longterm fundamentals won't change too much. Now sure, if everyone gets unemployed and 5, 10, 15% of people passing away from this, okay fair enough. Then there's another case to be had for that, but that doesn't appear to be what's happening right now.
Immanuel Ezekiel:
Yeah, I like to go back in history and look at similar kind of viruses, epidemics, and if you look at history of how many people have actually died from previous viruses like this, you'll actually see that this particular virus is minuscule compared to many other viruses and many other deaths in terms of millions of, I mean literally millions of deaths that happened previously, and we're all here, we still survived, we're still doing really well.
Brett Alegre-Wood:
I think it's an interesting perspective, is I live in Singapore and I travel around quite a bit, whether it be to Australia or the UK, so I spend a bit of time out, quite a bit of time out.
Immanuel Ezekiel:
Hang on a minute, am I allowed to sit next to you? You've just come back from Singapore.
Brett Alegre-Wood:
No, I'm joking, I'm joking. You can't catch it through video.
Immanuel Ezekiel:
Exactly.
Brett Alegre-Wood:
But I think the interesting thing is the way Singapore handled it, and Singapore was one of the first places to get it outside China, because of our deep links with China. The interesting thing is they've now got that relatively under control. It's not totally under control, it's not totally gone. It's still there, there's new cases, but the amount of cases has dropped off considerably. It's under control, and the way they've gone about that has been pretty good.
Brett Alegre-Wood:
It's an interesting thing, because what they did is they really focused the media on educating people and not creating fear mongering, and so most people knew if you go out, wash your hands more frequently and these sort of things. And actually, it's a really good test case for what hopefully happens in other places, and certainly with the UK. If you're healthy, you're unlikely to die from it, so don't worry about it. If you're unhealthy and you've got something, an accompanying illness or weakness, then don't go out as much, or limit the amount you're going out to wide group places and things like that. If you do that, we can get this under control and then we can get on with having a really good year in property, which is what everyone was expecting and certainly we're all hoping for.
Immanuel Ezekiel:
Yeah, I think the basic fundamentals is about cleanliness, about hygiene and taking precautions when you're not well. This is the first time where people who might not be well are actually taking the time not to go out and thinking about other people. Really, whenever you're not well, that should be a consideration. I think it's just bringing it to the forefront of how we need to act as a society and how we need to be responsibly.
Brett Alegre-Wood:
Yeah, and I think bringing it back to property and what you should be doing now with regards to property, is I think one of the challenges is, and actually nothing really changes, which means if you're going to buy something, if you're going to get involved in property, buy something with the best fundamentals. Buy something with cashflow and know what that cashflow is before you get involved in it, what the likely capital growth is, what the investment in the area is, the shops, schools, transport links, major employers, major investment, all the fundamentals, all that sort of stuff. That doesn't change, and if you buy in those areas, even if we do have a drop it's likely to rebound quickly, and then you'll see growth.
Brett Alegre-Wood:
Again, we're not saying it's not going to grow, but if you're buying or if you're getting involved now, make sure you do your due diligence. All the stuff that we talk about anyway. It's stuff you should be doing. Don't be listening to the BS and hype that salesman people spurt.
Immanuel Ezekiel:
Yeah, listen, if you're an investor already in property and you've got people renting your property, coronavirus, they're still going to be renting your property. In fact, if they've got to stay at home they're going to be staying there a little bit longer.
Brett Alegre-Wood:
Yeah, more wear and tear.
Immanuel Ezekiel:
So if you have a longterm investment, people aren't going to move out of your property that they're renting. They're going to continue to want to be there. We live on an island where we're producing 300,000 homes per year less than what we require, so there's always going to be a demand. The supply is actually not sufficient for the actual demand, so if you have a property, you're investing and you're investing in the right areas, it doesn't matter what happens over the short or medium term. You will still have that cashflow coming in every single month, every single week, every single year ongoing. There's ways to make sure that you buy the right property in the right area, with the right yield, the right return, to protect yourself over the longterm.
Brett Alegre-Wood:
Yeah, and I think the other side is the government, as much as they attack landlords and things like that, and that's a separate topic, actually they are putting things in place that certainly appears on the face of it right now to be committed to getting those houses built and actually getting more houses built. Which is great for our market, so actually that's a really positive thing. We were talking the other day about the development finance, how it's starting to free up a bit more. They've already come out and said that what they'll consider doing is freeing up the restrictions put on banks for lending and things like that. So when they start to act on the market, actually if there was a drop like this, it may well curve that out, which is quite good.
Immanuel Ezekiel:
Yeah, the market's changed dramatically over the last few months. Before Brexit, that was a huge concern. Nobody knew what was actually happening. Now that we actually have the plan to come out of that, everything started to look more positive. That's probably the biggest thing that we've had in the UK, even more so than coronavirus. Obviously Brexit has been going on for a number of years, lots of uncertainty right across the board. The stock market, the housing market, the employment market, people from overseas, and as a country we are very resilient, we've worked through that and we will certainly work through this short term blip in our economy and the pandemonium.
Brett Alegre-Wood:
One of the other things too is what we're finding now is that we're actually, the UK is re-exerting itself as a world city and a world market, because what's happening is a lot of those people from Asia are now reinvesting and we're seeing a lot of our international buyers are coming back to the fold and saying, "Hey, I want to get back involved," and they feel like it's the time to get back in now. There's some political certainty and some Brexit and that sort of thing, which is great news for us.
Immanuel Ezekiel:
The UK economy and the major cities are amazing places to invest if you have the right fundamentals. Got to go over that again. Buying the right property in the right location with the right yield, fixing your interest rates for three, five, seven or 10 years. You're going to have ongoing income during that period, and the market sometimes goes up, sometimes goes down, sometimes it goes flat. We just don't know when that's going to happen, but if you're investing for the longterm, for cashflow, property predominantly is about cashflow if you're a longterm investor, if you do that with the basic fundamentals it doesn't really matter what happens in the marketplace, you're going to be protected. People that are renting property haven't left their properties in coronavirus, they've stayed there and will continue to say there.
Brett Alegre-Wood:
I think the other thing is too, is if you own property over the long period of time and you're holding property, you are going to at some point experience that drop. You're going to have to live through it, so you need to get ready for it and make sure you get used to it. If you think that you're to get out right before it happens and get back in right after it, it's a fool's game trying to think that. There's no one that predicts that. You may get it right once, but I guarantee you can't repeat it over and over and over again with any accuracy. You're far better to build your portfolio so you can hold it all the way through.
Immanuel Ezekiel:
Yeah, I have this way of explaining property, that it's not a get rich quick scheme, it's a get rich slowly scheme. Property will appreciate over time, we just don't know when. Historically it's been between eight and 10 years. It could be 15 years, it could be 20 years. It will appreciate over time, but if you invest for cashflow that will always come, we just don't know when that equity raise is actually going to happen.
Immanuel Ezekiel:
In London, it happened very fast, and now it's actually going into the other regional areas like Northampton, Birmingham, Leicester, Manchester, Liverpool. All of those areas are growing faster than London, and the reason for that, you have the ripple effect, is that those areas, the loan to income ratio is much lower than it is in London. That's why they're starting to accelerate and increase their actual growth, and it will continue to do so.
Brett Alegre-Wood:
But the interesting thing is we've seen, since 2016, London has slowed right down both from capital and yield perspectives, from both yields, but now we're starting to see the capital values are starting to come back.
Immanuel Ezekiel:
Correct.
Brett Alegre-Wood:
The rents are still, I mean we're pushing our rents up all the time, we run about 1300 properties, manage about 1300 properties, and we're consistently pushing up our rents because obviously with regulations and all those sort of things, but that helps your investor and investors, their yield increase. We need to do that, because obviously we have taken some hits from taxes and from regulation and things like that.
Brett Alegre-Wood:
A lot of this sort of stuff is nothing to do with coronavirus, but I think with the coronavirus, don't throw the baby out with the bath water, is what we're saying. Stay focused on what the fundamentals are and keep investing, keep your head about you. If you're in a position where you're in vulnerable position, then maybe you need to grab a meeting with a portfolio manager or whoever your mentor is and just ask them how to secure your portfolio, but for the most part, I won't say sit back and enjoy it, because yeah, wow, sit back, wash your hands and we'll see it through.
Immanuel Ezekiel:
There's one thing I would like to add, is that where more property comes on the market, when it's a new build, you'll be amazed how many people want to move into a new build. So if you're buying a new investment property, you're going to have the most amount of people attracted to those properties because they're brand new. There's nothing for them to do, compared to a second or a third home property, something that's 20, or 30, or 40 years old, compared to something that's brand new, you're going to get a premium for that property and you're going to get it rented much faster.
Immanuel Ezekiel:
So now is a great time to be buying property, especially if there's uncertainty in the market, and there is uncertainty right across the board, including developers actually selling their property, so there may be opportunities to take advantage of this small blip in the current marketplace.
Brett Alegre-Wood:
Yeah, and look, we'll keep certainly you abreast of changes, so if that changes and the fundamentals change, which I'm not sure they will. Coronavirus can get worse, but I think, and all credit to the NHS and all credit to the system they've got here, they certainly seem to be quite prepared for this. Now, the thing with the whole Wuhan was that they got totally eclipsed. Their health services got totally...
Immanuel Ezekiel:
Overrun.
Brett Alegre-Wood:
Overrun, and so it took them a long time to get it under control, but actually, and I think that's what's happened with Italy too, but hopefully and I think we are seeing that now, that the UK is actually putting stuff in place earlier than leaving it too late. I think most countries now are starting to do that, and it will work. So, good.
Immanuel Ezekiel:
So I hope you guys have learnt something valuable today. If you want to contact Brett, you've got Bretts Property Rant in Youtube also at Gladfish, you've got Immanuel Ezekiel about raising your financial IQ. If you like any of the information, please like, share, and subscribe. If there's any further comments that you'd like to ask about Brett or myself, we're happy to answer any questions that you have going forward.
Brett Alegre-Wood:
Absolutely, yeah.
