Sunday Supplement 03/01/2021

by Jan 3, 2021

Sunday already and that can mean only one thing…..the supplement!

2020 was characterised by some really strange features in the property market. We now have some of the data that justifies how it felt, being at the coal face, with the markets up 7 or 8% according to some of the nationwide indices year on year. A couple of cautionary notes.

1) when comparing October or November 2019 to 2020, this won’t be a very good reflection. Why? Not because of 2020. Because of the general election that was looming in 2019. In October particularly there was still a live chance of a Corbyn win, and also 2019 followed a semi-regular seasonal pattern whereas alongside anything else the stamp duty holiday skewed activity in 2020. A more realistic figure is c. 5% in my view (still unjustifiably high – or is it?)
2) lower interest rates, good availability of credit in the face of a crisis and a genuine lack of stock, alongside greater motivation to move than in any year for the last 20 or more, led to a bit of a perfect storm. I know people taking out large mortgages that are normally debt averse, who don’t technically “need” them, but at 1% or whatever they will borrow the money! (And this seems rational at a rate below inflation for 2021 and beyond, almost certainly).

So it isn’t maybe as crazy as it looks. But stamp duty holidays or reforms always create cliff edges. I see a new feature being introduced in 2021, with a change in the bandings announced in the budget. Let’s see. 125k is far too low to start collecting SDLT although this is forgiven for FTBs of course.

In my own quest for a mighty portfolio, we picked up 2 deals right on the buzzer. One we’d first looked at over 12 months ago – another we had offered on back in August. Just shows the value of working a pipeline, tracking it and also being memorable (the two are related). Right on the buzzer, something that kick-starts the new year.

Both deals are characterised by really solid yield – one of them it is created by the discount, the other is discounted by definition but as a mixed use it also has more complexity than any other small mixed use deal I’ve seen, and that is the reason it is sitting as a deal.

Both of these started life on the open market – one failed at auction and is now selling via private treaty, the other is via a wholesaler as the vendor has failed on the open market. No two deals are the same!

It seems remiss to pass the 2 main headline grabbers by in the first post of the year. So firstly a few words on Covid.

We are seeing an immediate response to a) people breaking the rules over Xmas (no judgment intended) and b) a longer form reaction to London being released into tier 2 post lockdown 2.0. The latter has gained very few headlines but was a huge mistake and London is now paying for it. Schooling shutdown looks inevitable with this higher transmission virus. It has been said that it is like a new pandemic.

Just a couple of thoughts –
1) viruses mutate all the time and are “self-interested” in being more transmissible. Alongside that mutation, often, they become less deadly. There is no evidence for that yet at all in this case, but let’s hope that is the fact of the matter.
2) subject to the vaccine still being as effective, the race is now much more serious on vaccine rollout, hence the delay of the second jab of the Pfizer vaccine. Within a few weeks the Oxford vaccine, now approved, will vastly outnumber the Pfizer jab.
3) the whole thing has been very predictable since the “proper recognition” of it and numbers have again taken over. Many of the conspiracy naysayers have been proven wrong again and again. This doesn’t mean stop questioning (especially when messages from government are so very confusing) but if skepticism is leading to ignoring guidelines or reckless behavior, then stop now. We have a real danger of the few spoiling it for the many. Speak to anyone working within the NHS and they will give you an unbiased dose of reality. We are now really close to the point where lives will be prioritised and doctors will have to play God. Let’s hope it is the Xmas rule breaking hangover and things calm down in the next week. Lockdown 3 looks inevitable at this rate. The rest of winter looks really really tough indeed.

On another note, bitcoin is grabbing headlines left right and centre. Any technical analyst will tell you that once the resistance level was broken around 20k, it would shoot up – and indeed it has. However. A few cautionary words.

1) the biggest and best investors in the world, generally, do NOT like bitcoin (specifically). They’ve been wrong before but I’m with them on this. It is gambling, plain and simple.

2) if you’ve stayed out so far – stay out. FOMO is your only driver now.

3) only a few years ago around this time of year people lost their shirt getting in at or near the market high. I remember a whole variety of people with bitcoin tales of woe. There is no get rich quick folks.

4) just because digital currency is the future doesn’t make bitcoin the right vehicle. There are so many examples of this in the past. The road is littered with their skulls by the side of it.

5) when this top blows off it will be as volatile as the last dozen blowoffs. It could significantly damage your wealth.

Only gamble what you can afford to lose, and when the fun stops, stop!

Recent events for me have changed nothing. The world is so far away from wanting or accepting a fixed money supply that it all just makes me look on with wonderment – free entertainment! You can learn a lot about yourselves and your behavioral weaknesses by following your emotional journey watching the bitcoin price – when it comes to training them out, I’ve had many years of practice when it comes to speculation and it takes discipline and a recognition of your weaknesses. Almost an out of body experience!

Next week – more property and some hotspot/high and low predictions for 2021!

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