Why aren’t prices rising in the UK?

Brett Alegre-Wood
January 17, 2020

Video Transcription:

Hey guys. So why aren't prices rising across the UK? And I'm not just talking about in particular areas. I'm talking generally here. So forget the market cycle right now. What I want to look at is a much higher level of the macro economic reasons why things aren't happening and why prices aren't rising. Now, if you look at where they're not rising, it's where the fundamentals aren't. They may have been, but they're not anymore. They're not desirable places. And I talk about fundamentals, I talk about shops, schools, transport buildings, major employers, major investment. And really it's those, the three big ones are the investment, employment and transport. And I think one of the issues with this is that if you look at the places where prices aren't going up and interesting, I've just identified a number of properties in my portfolio that I've gone, you know what? These prices aren't going up. They haven't gone up. Austerity has hit them hard. There's nothing that I can see going on that's going to stimulate house prices. There's no reason for prices to go up.

So I'm selling those things off. And even though it may not be the best time to sell them off and I could probably wait and still make money and they're cashflow positive. And so I don't have to sell them. The reality is, is part of me as an investor says, I want the cash flow and I want the capital growth. And if the capital growth isn't there or it's not likely to be there, then it's time to get rid of it. And I've always said, never, never sell with the asterisks. And unfortunately for these places, and there's 10 different areas where I've got properties that I'm just looking at going there's no future. And I'm not saying, there's actually a lot more than that in the UK. And really, unfortunately, the government has really focused in on certain areas, major cities: London, London commuter, Manchester, Birmingham, Leeds, Liverpool. A few places like that where they're chucking heaps of money into. And then you've got all these places in between that are missing out massively.

So one of the things I say is that never, never sell with the asterisk. And how do I look at the asterisk? So basically if you look at an area, okay, and we're talking about a suburb or a town or whatever, what happens is you generally find that it will get run down. And when it gets run down against the point where crime will increase, all the fundamentals don't work. And then what happens is the government goes, we need to fix that up and investment gets put into it, both private and public. And then there'll be a massive regeneration program and you'll see, wow, this place is changing dramatically and the fundamentals will increase. We want to get in at the start of that and ride the fundamental waves up. Then what will happen is over time you have this period. This lull period where fundamentals are really good. Not much is changing, but you know what? It's still a good area.

And then what happens, over time when they don't invest more money then the infrastructure starts to drop away. The employers start to move out, the talent starts to leave, the kids grow up and they move to the cities or somewhere else that's better. And all this sort of stuff starts happening and there's this slow degradation. So where you want to get out is before this slow degradation starts. Yeah. So it's almost like we talk about top of the market, but this is top of the market, not the market cycle. This is top of the market, the cycle of fundamentals cycle if you like, which is the other sort of aspect that I talk about is if that fundamentals change and they're starting to go down, get out. And that's what I'm doing with these properties now. And unfortunately I'm seeing it more and more places around the UK where they were going okay. Then we had the global recession back in 2008, 2009 and nothing has happened since then. So we've now had 10 years of degradation. Yeah. Ignoring at the place, no investment, nothing really happening.

On top of all this, what is happening in these areas at the same time now is that we're seeing a shifted society where actually for instance, high streets are really suffering from this now where high streets just aren't getting anything happening. And the problem with the high streets right now is that there's no infrastructure, there's no investment going in. So they are getting worse and worse and that's going to continue to happen. So that's where you get out. So why aren't prices rising? Because the fundamentals aren't changing. And if the fundamentals aren't changing, then unfortunately you can't invest there but if you're already invested there, you are better to get out and put your money back into somewhere that actually has better fundamentals.

So you really got to sort of consider this because this is happening right now and this has been happening for quite some time. And there's nothing you can do about it. There's nothing you can impact about it. If it's an individual house, you can renovate it. If it's a street maybe you buy a couple of properties in the street and renovate them. Not really. If it's a whole town, forget about it. Just get out.

And so unfortunately that's the advice right now. The house prices aren't going up and if you've seen this, if you've seen 10 years where nothing's happening with your house prices, then it's probably because of this exact thing, the fundamentals, the cycle and the fundamentals is on a downward spiral. And if there's no money coming in, there's no investment coming in, then it's time to get out. Or it's time to not buy there. So it's one of the key things we look at. We love regeneration, we love where there's massive investment, massive change in fundamentals in an area. And that's one of the things that we really look for.

So guys, that's the reason why house prices aren't going up in your area, potentially, or in the area where you're invested or where you're looking to invest. And unfortunately, yes, you may get some growth, but it'll be more inflationary growth over time rather than fundamentals growth and really fundamentals is what this game is all about. All right, guys, have a great day. Live with passion and remember, subscribe. Leave your comments, happy to answer them and engage and yeah, talk to you later. Bye.


Property Investment, Property Prices, UK Property Investment, UK Property Prices

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