Full Transcription
Brett Alegre-Wood 05:07
Well, hey guys. So welcome to another week of property rants, UK property rants. So I've only got a couple of guys online, which is great. And we've got the comments up now. So we can actually any comments you've got send them through, and we're happy to answer them obviously. Yet, the more questions, the better. And that, of course, there's lots of topics and things to be covered right now. Lots of things to discuss. So yeah, tonight join by or today, I should say middle of the day for what's the middle of it's actually 1030 at night. I'm in Australia right now for the for Christmas. And then, yeah, so you guys are obviously in London, or London and Lincoln with Chris Hough. So Ritish, and we've got Himansu. And we've got Chris joining us this week. So Chris is our he is heads up at lettings, up in Lincoln. That apartment up there so he can talk anything about property in terms of lettings. So we can Yeah, we must get started. Right, guys? So what are we gonna talk about today? What's to talk about, shall we? What direction? Should we start off with the news that just come out? Which is the lovely inflation stuff that's going on? And I just realised that I've, we've got, it's not I'm not showing on the screen? Is it? I need to move it over a little bit? There we go. Yeah, okay. Yeah. So basically, the inflation's have come out the largest or largest inflation in 41 year, which is pretty full on, you know, we're at 11.1%. Now, for the year to date. Now. That's, that's over the entire year. So actually, so what's this? So we've already got a question, which is great. So scarcer says, Why have the house prices not reflecting the rate rises yet? And when will lay? So good? And I think the answer that actually is pretty simple. It's, it's always there's always a delay. So you know, there's a stimulus, and there's a response. And I think, you know, that's what we're seeing right now. And, and this is everything, do I, I think we've got a number of different things. And we can talk through each of the reasons why I think, you know, looking and read here, and, you know, talk about, you know, the war in Ukraine, which I don't believe and I'm playing I don't believe that game. But, you know, rising energy bills will take effect, obviously, the rising, everything is rising. You know, I think I think we've all seen that across the board in all our bills, that they're all rising now. And I think where they are we move back here. And, you know, I think prices have definitely gone up, you know, 11.1% over a year, it was the same 10.1% in that particular thing. But actually, if you go to the government figures, the ONS the Office of National Statistics, they say that it was 9.1 I think it was so it depends which stats you're reading, but we all know that house price, we'd all know that inflation is hitting us and going up and it's probably going to be around for a little while longer. Because obviously, it doesn't, you know, whenever you make a decision, it doesn't fix it immediately. All right, there is a delay. So yeah. Any thoughts on inflation? How are you guys because you're actually living in the UK right now. You're so you're seeing prices going up? And I know for sure you guys don't do the shopping.
Ritesh Patel 08:24
But I do make?
Brett Alegre-Wood 08:28
Do? I don't so I don't really see it on a day to day basis. What about you guys?
Ritesh Patel 08:35
Yeah, like you said, you do notice it very much on things like shopping which I've taken total control over to make sure anything that's not required is charged by the trolley. I make sure that all my requirements are the beers are in. But yeah, not everyone. You know, we're all feeling the fact that inflation and the money that we're using on a weekly basis is not going as far as it used to. I don't think massive both to me. It's not like I've been shocked by it because it's been coming again I think the talk about it has not it's been going on for months and months. Someone was just putting their head in the sand position. You know, it's been coming so not sure why. But I would like to go to that question put in here my scars regarding why our house prices not reflecting the rate rises yet and well when will they love assuming that rate rises rates have gone up by house prices ever massively come down? Is is what I'm
Brett Alegre-Wood 09:46
that's how I'm ready to
Ritesh Patel 09:49
So Look... My thoughts on that, you know, are very much lag effect of course. So anything that's done today, the effects of it, you feel a little bit further down the line, but going in a little bit deeper is. I think if everyone's sitting there and thinking the housing market, you know, all across the UK is just going to crash and fall off the face of the earth, like some of the headlines would have you believe. So you know?
Brett Alegre-Wood 10:19
Sorry, right? Yeah. gone on the wrong light. Sorry, guys, my technical expertise is are failing me. Here we go. So I keep talking to you
Ritesh Patel 10:35
just so, you know, you're obviously going to have those big headlines of house prices is going to drop by 20 30%, you know, ridiculous figures, which, you know, we were used to seeing whenever there's something major happening, whether it was Brexit, tax changes, COVID. He also asked by summit to fall off the cliff in the UK. But none of that actually happened. So you got to be very careful to obviously distinguish what actually is really going to happen and stay away from the scare mongering of the headlines. And what I think will happen is that I think there will be a correction, for sure. I'm not, I'm not, there will be a correction. But I don't think it will be a correction across the whole board, as in not the whole of the UK, I think it's going to very much come out to micro markets, where some areas will actually come out of it pretty well, yeah, where there'll be next to nothing. If any correction, some areas will fall off, some will fall off the face a little bit, okay. But you'll actually find some areas and this might sound like really steadily keep moving. I'm not saying it's gonna shoot up massively, we'll certainly keep moving. And that's what So you've just got to get very, I suppose local, you've got to, you've got to decide, okay, if I am going to invest in this market and take advantage of the opportunity, which doubt will come along, then I'm going to take it, but I'm just going to make sure I'm sticking to very specific areas.
Brett Alegre-Wood 12:09
Yeah, and I think we saw this in the last recession. Everyone said, I, you know, house prices are going to drop 30%. And I'm not going to buy now, I'm not going to do this. And the challenges that you face is that if you wait, if you're trying to buy in crappy areas, yeah, without the fundamentals and that sort of thing, then fine. wait around until it drops, and it probably will. But as we saw with London, last recession, was yes, it come down. But within six months, in fact, it was more like three months, it was back up again, you know, and so a lot of people were like, Oh, I missed the boat. And then of course, the old procrastinator, oh, you know, it's too expensive now for me to get in. And the thing is, then they had, you know, six, seven years of it's too expensive. And of course, now we've been sitting around with London, sitting around not doing a lot for the likeliness through Brexit and through, you know, tax changes and through COVID. And, of course, now I think we're ready to see London come back, because you know, there is a lot of demand for it, there's a lot of money being spent. So I think we're gonna be, and I agree with you, we're gonna get local, we're gonna look at what areas we're actually investing in or wanting to invest in. Because that actually determines whether you want to wait around or whether you want to stop getting involved now, because developers expectations and, you know, sellers expectations have started to drop, they're becoming more realistic pricing already, even though we've only just started to see it in the status. And of course, this month, we were hearing about how demand and asking prices has dropped. Well, that's the prequel to property prices dropping. So you know, to come back to the question there. But yeah, I guess you know, property prices, you know, you don't know how far they're gonna go down. But the interesting thing is with the whole with that whole game, is that what we have started to see is now we're we're we're getting back and we're actually having where there's this one's Yeah, you know, one of the largest chains today 5%, fall in London prices next year that said the capital would avoid, you know, a big crash, you know, major banks upbeat about the UK house price growth, despite rising rates, you know, so you're seeing a lot of this now where we're starting to get back into, it's almost like the doomsayers, and I don't think we haven't seen house price drops yet. Really, even though there is some reports and things like that they're saying it is we haven't really seen them anywhere near where they're going to be in some areas. I think they will get hammered, because they haven't got fundamentals, you know, and actually, to be fair, a lot of those places, you know, with allegedly we've seen 15% House growth or the lamps in house growth, or whatever, but those places haven't seen that they've remained dead still, you know, not done anything. But yeah, what that you have any thoughts on the house?
Himansu Joshi 15:01
Side? Yeah, I was just gonna say I mean, obviously you speak to developers all the time, right? What's the sentiment from developers? Are they going to suddenly now start dropping their prices? Or is it a case of Nope, we know, we're going to build to this spec, we know what kind of margins we need to make to make this profitable for ourselves. We're not willing to take a hit on that. What are you finding when you're speaking to developers?
Ritesh Patel 15:24
Well, you'd have met, you'd imagine much my job, when it comes to sourcing should have just become a lot easier. Getting developers who are saying, Yeah, rent is a double digit discounts and take it off my hands. But the reality is, it's not it's not there right now. Because the majority of the developers that we deal with, that I deal with are sort of medium to large sized developers, because our market to stay safe, where possible. We've worked with a lot of them, that they've number one big Ford sold, again, so you know, selling through the planning stages, so they've pretty much got lesions that will carry on happening from sales that have happened over the last three, four or five years will keep happening through the next couple of years. So that will sort of help them ride out the quiet downturn period, things moving along. The second thing that's coming into play is the international market, guys. Because it's sort of quite similar to what happened back in 2009, whilst you know, I fully observed in the in the UK, there might be the young uncertainties may be holding people back on taking that step. And buying property, whether it's for investment or home, whatever it is, but the opportunity for the international clients all of a sudden emerges where you know, for some of the pound sterling dropping off, it's almost like a 15 20% discount to buy UK, because of the UK is is a global market. You know, I'm not just London, even the major cities like Manchester, Liverpool out there, all these cities, people want to buy there. So the sales for the developers, as much as they might not be as high as they are doing, you know, times uncertainty is still slowly trickling through. So two things. One, you've got hold selling, so they're just moving along. Number two, they've got international sales, because there's certainly an opportunity for internationals, like there was back in 2000.
Brett Alegre-Wood 17:24
Yeah, it's, it's interesting, actually, because there's there's another sort of thing there where, you know, if you look at the, is it this one, yes, this one here. So you've got persimmon, who basically are a developer, they're saying that their sales, there's a fall off, you know, as obviously, the market dips. So these are actual, you know, the cancellation rate has risen sharply. And I think that's the other thing, too, is right now, they haven't started or they've started to see it, but they hadn't really had it. They've been making good sales has been good demand. But as that slows down, but my question for all this, too, is that, you know, guess get your thoughts on this is, how much of that slowdown of those cancellations is due to recession, interest rate rises, and things like that war in Ukraine, you know, that sort of stuff. And how much is actually due to the fact that we're now going into winter, people don't want to put three levels of coats on and their snow boots and walk out and go and look at 10 properties and things like that, which happens every year, you know, and we see this same time this time, every year. And then we see in March, you know, it'll start to pick up again, April, you know, by April, it should be, you know, when we get the beautiful days, it'll pick up again, I don't think it will pick up as much I think it will slow down. And it'll probably stay slow next year, as we go through and, and we shed some jobs, we've seen a lot of the tech jobs being shattered, you know, and, you know, footsies, you know, as dropped all those sort of effects. All of the indices have dropped. And you know, and there's not the availability of, especially for like London, when you don't have the seed capital coming into a lot of these startups, and these sort of companies, that's going to affect how many people they can hire, how many people can leave on, they have to get, you know, let go. And then they have to find other jobs. And that process takes about two years. But yeah, what I guess, are you guys, were noticing that cancellation of sales. I think you said to me today, or was it yesterday, you said How have you noticed that the availability of some of the developers, some of those plots started coming back on?
Ritesh Patel 19:38
Yeah, yeah. So yeah, I I'm sort of missing the scene over the last sort of week or so where, you know, certain units, which was sold of master price lists, which I have access to seem to be coming back with a sort of WhatsApp from the developer, saying, you know, let me know if you've got a client who would be interested in this really good unit to sell at that price. stat we originally looked at import, which is opportunity, of course, it's opportunity. So there's a bit of that. But at the same time, I can talk also from the sales that were making, as a business that, wow, a couple of sales here and there, you know, which are on and off. We're not having to, we're not in a situation where we've got, you know, all of a sudden, 20 clients who did the development of change that, by the way, you know, one of the projects we've done in Birmingham, for example, if you remember, we bought instead of learning, by exchanging, they reserved in a totally different environment, effectively, because of the early entry point balance on the contracts, and everything was ready for exchange just a week ago or two weeks ago. Not long. Yeah, I'm not gonna lie, I was sitting there thinking the market is sort of in a bit of a period of uncertainty. So these 20 sales happened in the space of a week, because that sort of project it was, you're gonna get nervous about, it's gonna fall out because there's stillness that that can happen. It's natural to happen. But each and every one of them stayed in it. I never exchanged. It.
Brett Alegre-Wood 21:11
I mean, they did, they did buy in, at the base, and even the developer said that they wish they had launched at higher prices. So, you know, they were sort of quids in already. In fact, I think they're about 20 3040 grand in already, I believe, you know, so. Yeah. I mean, that was a nice little project, we might say what it was, but yeah, it was, it was good. But I think the other thing was, part of the reason were insulated a little bit from this is, the type of clients we deal with are the type of clients, they've got money. They're, you know, they're out to build a portfolio, they've got busy, good careers and in good income. And I think by by focusing on that side of the market, because we used to wish to focus on a broad based market, years ago, this is going back to, you know, 2002, threes, fours, five sixes. And I think the problem was, when we hit the recession, a lot of clients suffered through that, because they lost their jobs and things like that. A lot of our clients now that's not our client base now. And it's not the type of property we're going after, where developers, you know, regularly go bust and things like that. You know, so I think it's slightly different. I mean, the developers do get busted. And you know, now is the time when a lot of Mar going bust, because prices have gone up so much contractors are failing, they're not paying them. There's a whole range of things. And that's a whole backstory, where I've got quite a few guys that are speaking to the business. And I'm sure you guys do, too, who have developers and contractors that have gone bust, they've just gone into liquidation. And unfortunately, that's happening, what we've seen the repossession rate that the repossession rates going up. I had don't have the latest data on there. But you know, that's the sort of which when you look at this, this is May 22. So this is the earliest this is actually on the government website right now, the latest stuff, but you can see in May 7 In a summons lens for that, like, that's not a lot 95 properties are repossessed. Yeah. across the UK in May, we'll see when the new data comes out, which I believe is due out pretty soon to see where that gets to, you know, it is increasing, definitely increasing. But you know, 95, that's not a lot in a month, you know, so, and I think hopefully, we had the mortgage market review, which meant people couldn't borrow as much. They couldn't borrow the higher loan devalues they had to have the affordability. And so that should insulate us quite a bit from that. But yeah, the actually one of the other topics I was going to talk about, which actually, this is quite a good one, as well, which is that really, and I've just made sure, yeah, fixed rates of falling, which I guess when we sort of think about it, you sort of think Hold on a sec, no rates are going up? Well, no, actually, you know, what they're saying is that, you know, the the average two year fixed mortgage rate is 6.28. Yes, as Moneyfacts, but all the major banks have reduced their things because the guild, the gilt yields have fallen back down, you know, which is that's an important thing to look at. But I think what what effectively do you think that has on the the market and the confidence and that sort of thing?
Ritesh Patel 24:34
The interest in interest rates, what the fixed product rates coming down? Yeah. I mean, we property when you've got liquidity in terms of the ability to borrow and the cost of borrowing will always have a direct impact on the market because that's what enables people to buy. So I think it's kind of early to say but it's a good sign that after the least trust this We sent everything, some calm and some perspective has come back into the market. As you know, there's a little bit more confidence coming back to the into those those rates again that way. I mean, I had a conversation with one of our experienced mortgage brokers that you know, those that industry Inside Out been around for a very long time those are what are tricky cases, not just a bog standard stuff and the rates have come down. Yes, the expectation is because next month, they should start stabilising more and more. But also in conversation with underwriters at that world, he said that they aren't fully aware of how the rate increase is affecting by to lead investors and, and they are actually in talks right now and working on on arrays to bring new products to the market, which keeps that industry moving, keeps beitler going because buy to let mortgages are a big part, a big part of the bank's books on making money. It's as simple as that.
Brett Alegre-Wood 26:13
Always say like, this is the you know, if you imagine this is this is the zero, this is base rate. And then there's a margin for the banks. And what's actually happened is the rates went back down, you know, here, and the margins actually stayed quite large for the banks. So you know, the banks actually were on base rate trackers, a lot of them. So what happened was, when the base rate went down, their margin was fixed, and so actually meant less money, etc, etc, etc. But what actually happened now is they've, they've now put it against standard variables, which meant they're able to charge more, as the base rate has gone up, that margin has stayed there. The problem is, if that gets too expensive, where people can't afford it, then what they have to do is they've got to go, you know what, the only way we're going to sell more mortgages effectively, is by dropping that margin. And I think what we're starting to see now is the base rate is taken up this, the margin is going to start getting squeezed. And as the margin gets squeezed, that will keep people buying keep the turnover funds, because let's face it, as a lender, the only way you're making money is by turning funds over by actually your loan book the size of your loan book, and creating new lines. So that's what we're seeing now, I think we're going to start to see some of that, you know, above that 6% mark, that starts to get a bit where people can't afford it. You know, and you know, if you look at my book, The three plus one plan, you know, we talked about mortgage cost averaging and 6%. And the interesting thing is with a 6% is, you know, for for ages hates people saying, Oh, well, that no longer applies anymore, your muscle throw that out that concept? And I'm like, No, that actually is a principle doesn't really change. And the interesting thing is now, yes, we had an extended period, where interest rates are very low. And it's a great environment from that perspective. But now, I think we're returning back to normality and what the market used to be, where interest rates could go above 6%. And they could go below 6% at different phases of the market. But the mortgage costs average, over the duration is about 6%. So it's just that we've forgotten and you know, we're very good at forgetting the sort of things you know. So I think that's one of the keys is, you know, we've got to just go back to the basics back to the principles that, you know, I wrote about in the three plus one plan, and then and then we will speak about, you know, because if we do that, and we look at the two year cash flow, and if we have to put money aside, on top of it, like I think, if you're in places like London, years ago, when we used to sell London properties, you will be selling it and you'd have to say if you want to get a high loan to value of 85% or 90%. Mortgage, you're going to need to put in some cases that was 300 pounds a month aside to fund that property, the shortfall of property, because when you do mortgage cost averaging, that's what you're gonna have to do. Now some of this period, obviously, it would come down below that, but that's what you do. And I think people have forgotten that that used to be the market we lived in for many, many years, you know, and perhaps we're getting better. Perhaps we're not perhaps we've got so much other debt and so much other stuff going on. That actually we can't afford to have those higher interest rate mortgages. And if they do go too high, you know, then things will really start to taper off, repossessions and then people losing their jobs and all that stuff. Then we start to get into deflationary depression II type comments, you know, which, you know, there's plenty of people talking about that now. I'm just not sure if we're, that's where we're at. We'll see, I guess, you know, so yeah.
Himansu Joshi 29:44
I've mentioned that last week, like we mentioned last week, but as well, you know, with rising inflation, rents go up as well, right. We've seen that I mean, Chris, that you were obviously an easy track and you're doing renewals and stuff and I'm guessing you've obviously seen rents go up by 20 30% went on last year. Yep. Right? Yep. So that's obviously going to affect cash flows as well. And we always talk about buffers. And we've been talking about buffers forever, as you said that we talk about putting 6% in for your, for your interest rates and stuff like that. But that's all about making sure that your cash flow yourself properly. And again, I'm telling my clients now when I'm speaking to them, put in buffers with with regards to your interest rates, and let's just work on worst case, 100 150 pounds, negative cash flow. So what does that mean? Let's set that aside for the next two years, so that you're able to cashflow yourself properly over the next two years. But let's also look at, you know, your loan to value look, we're working on 75% loan to value but let's worst case, let's work on 70%. Let's work on 65%. So you as an investor before you go in, you know how much money you're going to need as a worst case, because as with any investment, there is a risk. But our job, and you know, as an investor's job is to make sure they're able to mitigate that risk and putting in those structures putting those systems. And that's what we help them do.
Brett Alegre-Wood 30:58
Yeah. 100% Yeah. V. is the straight. Are you guys looking fuzzy? On your? A little bit? Yeah, my thing is, I thought it was Yeah, yeah. Anyway, it might be longer. Anyway, I was just gonna say, so we're gonna come in here. Let me put the comments up here, which actually, they've gone a little bit, they're a little bit haywire. Now, I need to make them a bit smaller. So yeah, that looks better. Yeah. Cool. Okay. So just to comment. So the counterparty risk to banks is higher now. So that actually adjusts to make their margins higher to reflect the outlook, which I agree that's that that would be in the perfect scenario, banks would love to do that. But if that's going to cut their demand for their product, and their competitiveness, that's not going to happen, you know. So, you know, I get it that it's a bit counterintuitive, where actually, as the rate goes up, you can't afford to increase, as the risk goes up, you can't afford to increase the rate that much, you may be able to do it some. But at the end of day, that's where you've got the actual sitting there going, well, actually, if we raise this much, and we make this much margin, we need to do this. And I think that's where, when you start looking at that sort of things. Yeah, I don't think we can go, you know, banks can't say, well, actually, I've got a 3% margin now. And I'm going to make that a 4% margin, because my risk is higher. I don't think that they can't do that. Because all of a sudden, if you're out of step with the market, then you stopped doing business. Now, actually, some companies will do that, because, for instance, they filled their loan book, and maybe they haven't got more fresh money coming in, you know, so they're actually just trying to lend it out at a higher rate. Because if somebody will take it great. But generally, what we find is as that as that rate gets pushed up, then the margin will come down. And you know, and I'm not talking, you know, down to millimetres, but you know, it'll, it'll start to come down, we'll start to sort of, you know, sit around that 6% mortgage cost every little go higher above that, but then also come down below that. So yeah. Any other thoughts on house prices? I was just gonna say, so I've got one more article here, which is, which? It's an interesting thing. And this is what I find. So this is the article you sent them. This is what I want chasis 10 regions where house prices are set to fall, the most house prices are set to fall the most see listings. Okay, great, right? So we're expecting this is the future because it says set before most. But then if we have looked at in here, I've highlighted data from how seller advice shows demand fell, in other words, has already fallen 15.4%. And I don't even know how to pronounce that. But anyway, yet, you know, so we've got that. So you know, sick, are they gonna fall? Or have they all already fallen? Well, let's go down a bit further and see what these 10 places are. And here they are, and 10 regions where the biggest falls in property prices over the past year. And you can't like heartless sick. So on the one hand, in land registry East of England, we there and this is it. So it's just you gotta be really careful with stuff like this, what you read, and whether it actually, you know, what it's actually telling you who's saying it, and what are they actually saying? You know, I think, and that's what I find so many people, they don't actually read where these things are from. They just read the headline. And that's it. And that's where I find a lot of problems come because of that. So yeah. What else have we got here?
Ritesh Patel 34:40
It's like, Yeah, I can't remember the actual name is Is it money? Is it specific magazine? Yeah, money was always and it was all about was all about was driven towards the equities market. So not to get people staying in equities markets at every single Meet the headline would pretty much be negative negative market. So, like you said, it depends on what you read and what their motivation is, you know, someone wrote this down of what I love about the UK market is, you know, we're going on a new market, you know, there's so much data, historical trends. So much historical data, so many trends, that you can actually look at that data and look at that data. Different parts include recessions in their low interest rate, higher interest rate than the purple Canarios in there, and then you see, you zoom out. And you can see how the market the property market performs through all those scenarios. Now, I'm not saying a history on this, just because something has gone a certain way, historically, there's any, there's 100% guarantee that the future will also go that way. But it will give you a pretty good idea of the way things are gonna go. So the good that UK market, especially in times like this, it's really important to forget the headlines, just data, zoom out a little bit, look at the historical trends, and then make your decision on what is going to happen.
Brett Alegre-Wood 36:23
100%. So, I guess, you know, house prices, I mean, it's one of these things where, who knows what the hell's gonna happen with it? You know, it's, it's an interesting thing is, I was looking at this, this article here, which basically, this is, this is off the this land registry data from gov.uk. So you can see average price of homeless, not to the type of value and do top property. But so this is all types of property, you can see, we've been growing, we had a bit of a stint here, you know, but the reality is, that's been the trend since 2004. We had a dip here, but pretty much we've had growth over there. If we come over here, unless a yearly percentage of change, so we've really only had drops, in house prices here and here. Okay. And the good thing is we can do it by, you know, flats and houses and see, but one of the things about most of this data is you've noticed, it doesn't really matter, the house, you know, the percentage drops aren't that much difference? You know, depending on what you look at, you know, so that's the other thing. The other thing is here, you know, by status, first time buyers, owner occupiers, you know, even though the price they're buying at changes, actually, the trend doesn't really change. And, you know, if you look at all the stats, you know, if you look at new bill versus Off Plan, certain new bill versus existing, one of the interesting things is, you know, obviously, new bill, on this chart, it's actually done really well, since January or 2020, you know, through COVID, and after COVID. Part of that, I think is you know, it's a cycle. So secondhand properties do really well. And then what happens is it tends to be secondhand properties do really well. And then new build properties do really well. And that also depends on the areas too. But certainly, there's been a lot of money, there's, you know, you've got build to rent, you've got developers really building a lot of property. I think that the real issue is this, they're not building enough property, and they still aren't building that property. You know, plus you add government stuff ups, knee jerk reactions, stupid decisions, that the industry tells them, this is going to be outcome, they ignore it. And then it's the outcome. And that's one of the reasons why rents have gone up, prices have gone up, you know, if you want to fix that, you've got to build more properties. But of course, I've been in the UK marketplace since 2002. When the battle report come out, I think it was in 2004. Talking about how we needed 120,000 offs. I can't remember how many was somebody years ago, and they've never really done that they've never really exceeded it was like why did you spend all this money on the back report? And then not back it up. But I just don't think the government's really, you know, motivated to do much about that. And solvent. Maybe they are now hopefully they are now. But we're not really seeing that, you know, that much? Which Yeah. What else is it? Let's let's have a look at some of the letting stuff that we've got. Because I think going along with that we talked about, you know, the new bill prices that are actually coming up faster than than the established stuff. But one of the reasons is this article was about people are ignorant about EPC ratings, and to a large degree they are if you ask most people what a a versus a G versus a C, that's the DIA. They're not going to be able to tell you but the one thing that is changing, which is the story you're telling is that lenders are now starting to offer better deals. For better rated properties, so that's actually playing straight into our hands. As you know, our our forte is new building off playing stuff with, you know, high ratings, you know, so which is great. But yeah, so was, what are some of the examples of that? What What are they doing?
Ritesh Patel 40:18
So yeah, it was just I actually came across that because a friend of mine who's always looking at business opportunity said, he knows I work in property, he says, Rick, surely this is a really good opportunity for a business. If energy efficiency ratings are going to become that much of a big deal, then they're going to affect prices of properties, which are energy efficient, are going to be in more demand, and are going to lend more money on them. And that's Barclays, one of the banks, for example, who if you buy a new build property, or something which is newly being bombed with any efficiency made things like that high end, then they will lend me two verses if you're going to do it. And there was also another lender, which I can't remember off the top my head talking about also, they will get better interest rates. I think it might be that West, but don't quote me on that. But yeah. Either way, it's not, again, whether it was backmarkers NatWest, whoever it was, it's actually theory that the way that the trend as that grows, because these mainstream banks start started, but that will start filtering down. And as a country, as a world, everyone is becoming more and more aware, more incentives out there. Environmentally friendly, and all these things, and energy efficiency is part of that. So if we're jumping onto a trend like that, you know, is a smart move, in my opinion, because what we'll find then is that, as it becomes the norm, more and more people will want to buy new property or properties, which are pretty new, but they've been done up. So all the energy ratings and efficiency ratings are very high, because ultimately, that affects that annual rental side, because, yeah,
Chris Hough 42:07
yeah, that's it. And especially with the EPC ratings, to letter proxies, going up higher, so you're gonna need a higher spec, you're gonna need a grade C, or 2025. In order to be able to rent out properties aren't your properties. This, you know, all the energy proficiencies there is going to be great for for investors on the real property.
Brett Alegre-Wood 42:33
And, and we're already seeing some of the profit. I mean, we actually I think we only have one property that's under a, I think it's under a C or D, it's, there's very few properties we have, because obviously, we sell new build off plan. And we have even though some of those new build offence, I was just saying the other day, it might the first property I bought was 19 years ago, you know, so it was new build back then. But I don't know how long I can claim that new being new build. But and that's that's a lot of our a lot of our investors. I mean, amazingly, they're now coming to us saying, so bread, I'm retiring, or I'm retired. And now I'm thinking about, you know, my three plus one plan. I've got my 10 properties, shall I sell off half? You know, what should I do? You know, because we've been going that long, you know, it's it's almost ridiculous. I mean, I can't believe this sort of stuff on the side here. I don't know what's happened there. But yeah, when I joined this business, when I started this business, I certainly wasn't there, you know, but, um, but I think the, the amazing thing is with the the, the EPC side is, most people have no idea. And really, as much as we have to serve it to them as part of the initial documents and all that sort of stuff. Nobody really looks at it, nobody really understands. And that's what that article was about to say, it's actually a failed marketing thing. It's a bit like carbon credits, you know, if you walk up to the the average person on the street and say, Hey, how would carbon credits saving the Earth? And they'll be like, well, you know, really, it'll be able gibberish. And who knows? And, you know, clearly, somebody's making some money out of it, you know, hasn't really made the efficiency better? I don't think so. Will it? I don't know, I think the government if they're going to do it need to actually put some serious education and reasoning behind it. Well, I mean, have you got any thoughts on that, Chris?
Chris Hough 44:17
Yeah, see, I think people are going to be more, they're going to educate themselves on it. More and more, especially now, because the cost of living crisis is going up. People are gonna be looking at utility costs. And I think they are going to be looking at the EPC certificate on the property that they are renting or looking to rent, because the higher is the cheaper in running costs. It's getting, it should be for them. So yeah, definitely, I think that the tenants will become more and more savvy and educate themselves. And that instead of like you say, just looking at it and not acknowledging it or understanding. I think they are very much going to be looking on that now. Yeah, it's my property they're renting. And for investors that are looking To invest, you know, the, I think that they'll also be looking at that from from a developer's point of view, because that's going to be part of the unique, unique selling point of renting out their flat is that they're going to be the, you know, Energy Rater that they can be to help tenants save as much money as they can, that
Brett Alegre-Wood 45:21
I mean, the interesting thing is how they can do that they're already if you, you know, they already talked about how there hadn't been enough housing stock, you know, they're not building enough. And now they're gonna say, well, anything below seat we're gonna take out of the marketplace entirely. You know, I mean, I love I love the concept. But I just think politically, it's a good conversation to have, I just think it has really, I mean, if they put some, if lenders put some real money behind it, and say, We're gonna lend, you know, higher loan to values, which, obviously, higher land values are more risky for them, but actually, it doesn't cost them any more, if anything, makes them more money. That cheaper interest rates, that's really putting your money where your mouth is now, because now she can go well, actually, if I can get point 2.5 something off my interest rate. Now, people are really gonna stand up, you know, but I don't think the government's really made the you know, they said, You've got to spend, you've got to increase it, but only if it's up to 10,000 pounds, I think it is or 5000 pounds.
Chris Hough 46:26
But yeah, so with that as well, do you think that the the number of first time buyers will increase as well, if properties are starting to fall below the minimum rating? I mean, I don't know the details if sales, if EPCs have to be a certain category for a sale, you know, on existing builds existing properties?
Brett Alegre-Wood 46:50
Well, one of the one of the good things about being in new boiler off plan is, whenever a government wants to stimulate the economy, and get things out of a recession, the best way to do that is to stimulate new build. Yeah. So a new bill by its very nature is going to be the EPC rating is going to be higher, because you've got that, you know, a lot of people sit there and say, Ah, you built that make them like they used to, you know, much rather than old period property. And unlike screw that, you know, because when you talk, you know, I mean, okay, it's got character, you know, what some of the stuff that I think the new stuff has got character too, you know, and I guess it's the, you know, old timer versus young kid, you know, my kids think I'm old now. You know, and I think there may be some of that. But to be fair, I'd much rather a new build property than a period property. You know, maybe that's just because I'm biassed, because that's what the business sells. But to be fair, now, I'd much rather that I hate the creaky floors. I hate all that sort of stuff. Because all that just adds up to Yeah. And I mean, now it's gonna add up to more cost with the utilities is, you know, potentially I get a lower interest rate. So yeah, make sense? Yeah. We'll see. I guess it I think it's a failed marketing thing right now. But if they keep you know, if they make some incentive behind it, I guess it could work. Right. Well, you know, so yeah. What about renters reform bill? Because it's an interesting one. You know, I put this out. I pulled this out, mainly because, you know, Minister says restaurant will be introduced during this parliament. All right. Oh, by the way, this is in October a month ago by Simon Clark, who no longer exists. So and as has happened all the way along with this, this razors reform bill, is that it's just since we're getting kicked back into touch kicked back into touch. Now they keep talking about it, you know, and it hasn't gone off the table yet. Because you got guys like shelter regeneration, Renton? What is it London renters union who are protesting in five different places outside of estate agents that are responsible for, you know, raising rents. You know, it's like, you know, but anyway, yeah, I don't know. What's your thoughts on that? Chris?
Chris Hough 49:14
It's a it's a difficult one at the minute. I mean, the section 21 is in my in my opinion, very vital for for the lettings industry. Because it's no fault eviction. That's what it's section 21 notices. Now, we only know that really, if a landlord is looking or needs to sell his property or will accompany we serve a section eight notice when it gets serious. If they're looking to abolish a section 21 There needs to be a whole heap of things that need to be carried out first. So looking, you know, even the legal the legal system, you know, I'm attending court and are on 20 ones at the minute. And you know, the the whole legal time and processes is very drawn out so that that all needs to be looked at streamlines. If you're taking out the section 21, and a landlord does want to sell currently under Section Eight, notice there's no, there's no wasn't there. So effectively, we abolished section 21. Now without reforming the Section Eight, a landlord could never sell a property with a tenant in situ.
Brett Alegre-Wood 50:27
And one of the things that pisses me right now is that in the in the rentals reform bill they talk about, they're going to abolish section 20 wants to give tenants more security. Okay, now, okay, maybe other agencies are assholes. But I've never, you know, I've never seen one of our landlords call me up and say, Brett, I just feel like evicting them, they've always got a genuine reason. And if they take away those genuine, and they're not, they're not talking about taking over this generation. So they're saying that we need to adapt it. So if they sell, they can have that. So actually, whether it's called a section 21, or whatever they want to call it, I don't care. As long as the ability, my challenges, they keep talking about the stick side, which is take away the 21. They don't talk about what they're going to do to harden up. And to make the process easier to evict tenants who refuse to pay, you know, who just take the piss, who damaged stuff, who antisocial behaviour, who, all these things that go on where we're powerless, you know, the courts don't really, you know, function, they're not functioning, the police don't care. You know, I mean, yeah, they'll go around and, you know, have words with them. But even then, when you try and get them to write a report that you could probably use against, you know, in a judge? No, they won't, you know, and then it's just ridiculous to me, and they haven't addressed the issue yet. You know, and that's what pisses me about the whole section 21 removal is that, my fear is they're going to remove it. And then they're going to try and sort out the mess they leave for after that. And the mess is going to cost landlords even more again, and drive more landlords out, and therefore drive rents up higher, you know, because there's less properties available, you know, which has happened every single time. I mean, you think these guys these five, excuse the French idiots that Ron Paul, that, you know, they're politicians, they would learn their lesson, but you know, what their motivation is not that I guess. And I say not their motivation is to get get voted back in. And so yeah,
Chris Hough 52:34
is that we will end up losing a lot of landlords if this section 21 nose is abolished, in my opinion, as well,
Brett Alegre-Wood 52:44
especially, especially if that I've replaced it with something, you know,
Chris Hough 52:49
not there. Because again, then going hand in heavy, you know, tenants favour rather than the landlord is just not very even, which is, you know, the challenge that we're facing,
Brett Alegre-Wood 53:03
yeah. And it's such a, it's such a pain in the ass right now. Because we spend so much time with rent arrears from tenants who just have chosen not to pay, it's not that they've got COVID lost their jobs or anything like that. They're in little bit of financial difficulty spent too much on a piece on Friday night, and might register on Monday, or sell won't pay it. I didn't pay it one month, I you know what, I'll just won't pay it. The next month, I'm going to be moved out anyway. So now I'm three months, then we have to say two months, we, you know, we sin, Section eight and whatever else. And that's four months to six months before we actually get into court. And then they give them 14 days. And then they go well actually they call up and say Well, we haven't got anywhere to live. And the council says well, don't move out to the bailiff turns up, then it's, you know, four weeks to get a bailiff, you know, you're looking
Chris Hough 53:56
at, you're looking at 12 months, you know, for Section eight,
Brett Alegre-Wood 53:59
which is, you know, and that's the frustrating thing that we see is we see genuine landlords providing good quality homes, doing everything right, even going over and above because a lot of them, you know, rather than issuing a section eight after two months, which they should do, and which is, you know, basically I plead for them to do they leave it and give them a chance after chance after chance. Then they're six months in, you know, it can be 1314 15 20,000 pounds, they're down. And do you think the tenants are going to pay that? I mean, unfortunately, we've now got debt collectors involved, where we're just giving the debt off to a debt collector and saying, Listen, there's the debt, got, you know, you can go after it. Because it's just, you know, it's becoming too easy for tenants just to go, Oh, you're not going to chase me. You know.
Chris Hough 54:55
So I mean, the biggest thing for a landlord to do at the minute and especially with the rent As you know, with everything going up in price just generally, is getting surance. You know, you've got to rent and legal insurance on your property. That is, that's a given wants to be, you know, the first thing you look at analogy I use with normally landlords is, you don't drive a car without car insurance. So why rent out a property without rent a legal insurance? Yeah, you know, all this is safe, you safeguarding yourself with loss of rent, and then your legal costs as well, up until the end.
Brett Alegre-Wood 55:34
And you're talking for you're talking, you know, 20 to 30 pounds a month, to pretty much cover yourself, you know? Yeah, you know, so ask was just sent another good question area, sorry. A bit of a delay on my mouse button. They sent the same red with red tape for institutional animals over there. Thank you, to, you know, what, you're right. I've said this for a while, you know, build to rent is all about handing over the what was the, you know, where mum and dads were getting their pensions from, they're now giving it over to the big institutional landlords and pension funds and things like that. And that's a bill to rent is about, you know, make the section of the tax changes, you know, everything is playing into institutional landlords taking over running the market, and having that control. You know, unfortunately, you know, what's the World Economic Forum One, you will own nothing and be happy for it. And that's kind of where this is heading. And my take on that is you need to fight as hard as you can to keep buying property. Build your portfolio? Yeah. Because it is cyclical, you know. And as much as now we seem to be taking, you know, hits every in day, actually, that will turn around and when it turns around, because understand this recession that we're going to go into, no matter how long it is, whether it's a four year, Great Depression type, you know, drops and things like that, which interesting, you know, great depression, if you're the stock market drop form for years, you know, so we had a four year period. So if that's the worst, that was, where are you one year into that. So maximum three years, could be a year left, already started shedding jobs, a lot of the jobs that were shared, were shared in the COVID times. So we're kind of in that period where the recession hit when we come out of recession, what happens the property, boom, yeah, so after the recession hits the boom, so the people that want to sell now, I kind of sell in the worst time possible, really, you should be holding on as tight as you can. And obviously, if you can't afford it, if you can't afford the change, then fine, we've got to get rid of you got to shed some off. But at the end of this will be property prices, increasing rents, rents will continue to go up now, then property prices will go up, because obviously, with rents going up wages going up. What can happen now, affordability gets better, and of course, house prices go up. So that's the natural cycle of things. And we're just playing the natural cycle out like we do every other time. Have you guys got any thoughts on that? Ritesh? And that's it.
Ritesh Patel 58:23
I think I just think, yeah, with that. That's why getting inflation under control is, you know, we deal with the Fed Bank of England the fight, you know, and people might think, Well, why is it obsessed with that, you know, when there's so many other issues that, you know, that people need to deal with here? And now, you know, in terms of all sorts of things, but it's the silent thief, isn't it inflation? You know, so you can keep increasing wages, and you can only do it by so much. Okay, before it's that one, I can't afford to increase wages anymore. Patients boys too high, then it doesn't matter. But if you can you increase wages to where you can, and then get that inflation back down again, that's when that wage increase has an impact.
Brett Alegre-Wood 59:14
Yeah. And the right and the affordability is, is actually enhanced, so that the property prices grow. Because actually, you're right, if inflation just keeps going up, and wages keep going up, then there's actually no change. You know, apart from as an investor with debt, my mortgage drops, my the real cost of all the real value of the debt of my mortgage drops, which is a good thing, you know, and that's why, you know, stay focused on building a portfolio and getting more debt. I know that sounds terrible, but actually, you know, the debt is the thing that inflates away, and there's a huge benefit in that for you. Because as the property price increase the debt against that must stay the same, but inflation is getting rid of that money for you, which is good. So just one other thing I was gonna sort of other article. So this is a good thing. Yeah. So we've been talking about this ages, which is basically so this is Felicity blue Shan is it I don't even know how to pronounce it. So she's not considering rent controls. Now this excuse my French death. So the car Mayor of London, you know, he's been holding, you know, he hold that he held a conference about rent in London, and didn't invite any agents, any landlord bodies, nobody. He invited Generation Rent, and all the you know, those guys and basically, you know, it was almost like, let's get a few mates around the table and come up best ways that we can actually try and force this out. But you know, it's it's proven that it doesn't work anywhere ever. All it does. The backlash is huge. And then rents go up and renters lose. So he's just been a, it just has no idea. I don't know. Yeah, anyway, don't get me started on him. But any thoughts on that? The rent controls?
Chris Hough 1:01:14
Yeah, I'm glad it's not happening.
Brett Alegre-Wood 1:01:19
today. Yeah, sorry. It's,
Chris Hough 1:01:22
yeah, no, he's just because again, for the landlords themselves, investors costs are going up. So if you're going to cap or rent at a certain certain point, it's, it's gonna become, you know, a non business sensitive thing to do. Yeah. So I'm completely for non non rent, you know, non rent controls.
Brett Alegre-Wood 1:01:45
Yeah. It's it just, it does not make any sense. Do you know, it's interesting, I've been doing some renewals for the last few weeks, I've been jumping in to help out with the renewals, because what we're trying to do is bring all of our renewals forward that we need to do in November, because we didn't want to do renewals in November, because if we do them in November, and then they're noticing, then you end up having Christmas without a tenant. So we're trying to avoid that. So we'll pick them back up the first week of December, which means we're then first week in January if they give notice. But But it's interesting because dealing with that, the great thing about the renewals process is you have the landlord on one side who wants to get the maximum rent, and you have the tenant who wants to get the lowest rent, and you sort of go try and find the happy balance. And there's you know, ways and means that we do that. But it's interesting, one thing I love about our landlords, is that not one of our landlords has said screw get rid of the tenant, I don't want the tenant, every single landlord without fail, that I've spoken to, has said, you know, I've said to him, Look, we can get this, you know, we can effectively get this as rent. This is the bread that we can increase this so there's you know, there's there might be 100 pounds difference or whatever, 50 pounds difference or something like that. But in every case, the landlord said no, I'd rather keep the tenant than lose them. Yeah, yeah. Which, and for me, that's, that's a testament to how we, I guess how we train our landlords, but also, you know, the type of people that we attract. But the stupid thing is, I don't think that's us. I think that is most landlords are of the same because most people, you know, they're decent people. Now, yes, there's the extremes. And I think the problem is, with a Generation Rent and all these guys is that they deal in extremes. And they think that every landlord is an asshole who just wants to drive rents up and get the maximum rent. Now, you know, the problem is for a lot of landlords right now, which is actually all credit to a lot of our tenants as well, because when I chat to them, they're like, look, I understand that the tenants, the the landlord's mortgage will have gone up, you know, so they're understanding. So actually, both sides are understanding. I think a lot of the media is hyping this stuff up. And it doesn't necessarily need to be like that, you know? Amazing how many tenants will say, hey, I can afford to pay this much of an increase, you know, but that's all I can afford. And then I'll go the landlord, they'll go fine. Let's do that. Yeah, that I've not had a single case where they've gone not screwed, chuck them out, not interested. You know, I want 300 pounds extra and they're only 350 or whatever it is. And actually, some of the area's rents have gone up dramatically. And you know, still to this day, as much as people say things are slowing down. We put a property on the market. You know, we get multiple viewings and multiple offers normally, you know, some of the areas you know when bit more crappy areas but yeah, yeah, cool. What else do we need to chat about? Are we done I think Yeah, I think that's all I've got. There's nothing else I need to is there any more questions from the guys listening? We still got anyone on board. I can't see how many people we've got, unfortunately. But yeah. And actually, I don't know, because we're actually streaming across to 13 different social media channels and things like that. So, but yeah, but anyway, we're here every week. 1230. Wednesday. And yeah, by all means, join us ask your questions, send us questions, we're happy to answer them, jump on, send his notes on site or comments on social media, and we're happy to come back and answer them. But any other anything else from yours?
Ritesh Patel 1:05:40
No, I just before we leave, just like to sort of make a note, look over the coming days, weeks months, we're in that sort of period where, you know, I call it turbulence, you know, there's going to be like headlines coming out and saying, Come and do it, and or, you know, all these sorts of things that they're going to be there. But I think it's very important as if you're, if you're an existing investor, or someone who's thinking of investing or whatever it is to just put a bit of perspective into things. And always look to long term Smash, I say long term with all investments, but specialty property, you've got to look at medium to long term, because we always say if your property for 710-510-1520 years time, you know, most people will agree that it will be worth a lot more more money than it is today. And the reality is we talk about 1015 years, regardless of whether you buy that product, when you do buy it, if it's a recession, or economic, really good times, or high interest rates, low interest rates, whatever it is, when you buy property and hold it for that long, you will feel all of those periods. It's just so where does it come in, but you just got your set yourself up from the beginning, expecting all these things to happen and hold through it, then it will pretty much become irrelevant, because we don't want to do is sit there trying to catch the bottom of the market? Because you never will. Well, you might if you get lucky. But it won't be it won't be that worse. So a strategic you just got lucky.
Brett Alegre-Wood 1:07:12
But But you're exactly right. I never, you know, I looked at that property that I had 19 years. I know when I bought that. I you there's no way I was thinking about owning that in 2022 or 2023. You know, it just wasn't you know, it was it was so long ago, so ridiculously long ago that the reality is I've held it through two recessions, high interest rate, low interest rates, everything, I've held it through the whole lot of help through leaks, I've held through having to repaint the bathroom, repaint the whole house again, I've even had to, it turns out that I bought the wrong property. Well, now the land registry stuffed up, they know, the developer put the plans upside down. And they registered as wrong one. So I, you know, had to change that. So I own the property that I own. You know, but yet, you know, this, I've you would never have thought. But that's the amazing thing about a lot of our clients is that they're probably in the same boat, you know, they bought properties, you know, some now 18 years ago, you know, 2004, you know, onwards. And they're they still own those properties now, which is just incredible, you know, so you will own them through thick and thin up and down high interest rates, low interest rates, recession, non recession. And sure we all like to buy a property and see it grow massively, you know, in the three months after we bought it, but yeah, that's not reality in most cases.
Yeah. So yeah. No cool, guys. All right. Any final thoughts? No. Okay. Well, guys, thanks very much. And we'll see you again next week. Any questions come through, you can just send an email to webinars at GLAD fish.com. Or actually, in fact, we can start using support at GLAD fish.com which has no problems but yeah. All right, guys. Thank you very much, and we'll see you again next week.
