Supplement 13 Oct 24 - Tax, Investment and Efficiency
“The biggest risk of all is not taking one” - Mellody Hobson, American Businesswoman and chair of Starbucks
Before we get started, this week I wanted to just outline the Boardroom Club with Rod Turner that I’ve been running alongside Rod for 4 and a half years now.?
The Boardroom Club is a group set up to help take property businesses to the next level. Rod and I often get asked about 1-2-1 mentoring and it isn’t something we provide or have the appetite to provide in the near future. However, there is a 1-2-1 element to the Club and it includes the following:
If you are interesting in joining - drop Rod or myself a message on LinkedIn:
So - WHAT a week with negotiations left right and centre on ticket sizes from one unit to 50 units, and a fair few in between. More properties secured as budget fears reach fever pitch. Few are realistic of course, on the portfolio front, but the occasional one is - good news. The key remains motivation - what’s the reason for the sale. If people are being coy or playing hard to get - there’s just no time or room for that at the moment. Follow up after 30/10.?
Chris Watkin has had a week off the broader market insights this week, for which, of course, we forgive him!
Moving to the macro - there’s plenty to go at. The Halifax House Price Index. The RICS UK Residential Market Survey. Growth figures from Friday. There’s plenty more but we are contractually obliged, or more likely completely fascinated by, the gilts and swaps to round us off.
So - Halifax. Much maligned (by me). Their -4% prediction for 2024 is now 8.7% adrift as they print +4.7% for the past 12 months and 0.3% up on the month, +1.2% on the quarter. They blame weak base effects (but presumably they knew what the base effects would be 11 months ago when they made their predictions - but there we go).?
Their price index is ￡108 short of the all-time high on the Halifax index of June 2022 (￡293,507). It’s fair to say the last 2 years+ have been spent recovering lost ground - I’d absolutely agree with that. They are now predicting “modest growth” over the rest of this year and into the next. They don’t really define “modest”. Perhaps they are learning their lesson. The consensus was 0.2% growth and so the forecasts were very nearly right, for a change. September’s reversion mortgage rate (average lender SVR) was down 14bps to 7.69% - still eye-watering I am sure you will agree.
The RICS UK Residential Market Survey, then. They lead with “Sales market activity continues to display a more positive trend”. New buyer index remains in positive territory. Sales and new listings displaying stronger momentum. House prices rising “at the aggregate level”.
It’s been incredible to watch this year as the market has climbed in spite of a largely bearish RICS survey report, month after month. Of late they’ve started to recognise that most see prices rising over the NEXT 12 months, when they’ve been rising in the background over the PAST 12 months. Remember the survey looks at the balance so if 100 RICS respondents respond to the survey, and 60 say things are improving and 40 say things are getting worse, the score is +20. Similarly, if 50 say things are improving, 30 say things are getting worse and 20 say things are staying the same, the score is STILL +20 - one of the inherent flaws with this type of scoring methodology, but there we go.?
New buyer enquiries for September were scored at +14. Agreed sales were at +5 from +6 last month. +23 expect increased sales volumes over the next 3 months (which, bearing in mind those three months are the last quarter of the year, not notorious for sales volumes, is a very bullish reading indeed).?
The YEAR ahead is now posting +44, so you can see a very strong upwards trend coming according to the RICS. The RICS members, as a rule, are very cautious. They will only come to the party once it is WELL underway. However, there’s no doubt at +44 that they are well on the bus right now. The rise in new instructions was a strong +22 for September. The average number of properties available per branch was up to 44.6 (the highest stock availability number since December 2020).?
The headline figure - the one from the survey that tends to be reported - printed +11. That’s the net balance. August was 0, July was -16. This is finally the indication that prices are indeed, according to the majority of RICS members, on the rise - like I said, slow to the party. This ends a run since October 2022 (when……OK I’ll leave it) of negative or zero readings on the overall RICS house price balance.
Over the next 12 months, those who think prices will increase printed +54. This is extremely strong - the strongest since April 2022. Finally - there can be no more denial as to what I’ve been saying for well over a year. Houses - much as everyone wants to decry them, mostly because they don’t understand inflation - are actually pretty darned cheap in real terms right now. If you think you’ve seen a tear-up in the past……and if you believe the “people can’t afford them” rhetoric - buckle up, your mind is about to be changed. Just know one thing - I’m not the sort of person to say I told you so. Except I am.
Tenant demand next - a +22 reading. It keeps going up and up. The +38 in 2023 was higher, but this is demand up from previous months, not compared to where demand was a year ago. It just keeps rising, although at a slower rate which is probably a good thing given how badly undersupplied the market is currently. Affordability, in my view, remains the only governor of rents right now.?
Landlord instructions? -29 and continually slipping. +39 see rental prices moving up over the next 3 months. There are then some interesting graphs always shared within the report which are worth commenting on:
Expected average annual change in prices over the next 5 years - just under 4% per annum.?
Expected average annual change in rents over the next 5 years - just over 5% per annum (so yields continuing to improve, that would mean, but much more slowly)
If you were going to use a number in your models, the relative bearishness of the RICS should really give you quite a lot of confidence in using these numbers (nationwide) - if you wanted the data regionally, you’d have to pay for the report (or scour google very hard, anyway!)
Over to growth then - and, indeed, back to growth. I’ll start with NIESR and their real time GDP tracker - they forecast a 0.2% growth rate for Q3 of 2024. The ONS figures are that August was growth of 0.2% month-on-month, but the last couple of months have been flat - so the expectation is also, it seems, for a flattish September as far as NIESR are concerned.
Similarly as already reported growth was revised down for Q2 from 0.6% to 0.5% by the ONS, and the last 12 months have now shown growth of 1% in GDP (although since the start of the year we are now up nearly 1.5%). It seems we won’t reach my stretch prediction of 2% thanks to the recent negative rhetoric and complete inconsistency from the new Government, saying they want growth and then making noises that are completely anti-growth leaving businesses and individuals with no confidence; still, I don’t see GDP growth in the UK under 1.5% for the year in spite of their best efforts to mess everything up.
Remember that between August and December 2023 things contracted a reasonable amount (0.4% or so) and that’s why we are 1% up year on year but due a 1.5%+ print for the year, if that makes sense.
A recap of the tale of the tape this year - surprise growth (outperformance, but really simply bounceback and really dragged forward by a massive drop in inflation, because remember GDP is always measured in real terms) for Q1, and Q2 decent but knocked off its perch by an election and uncertainty in June. July also flat as the country worked out what was going on with the new Government, even though there was hope.
August up as we kept calm and carried on - we are British, after all. Then things started to unravel in real time as it became clear - at the most charitable - that this new Government hasn't got a bloody clue what they are doing. To an extent, of course they haven’t. None of them have done it for at least 14 years and most of them were not MPs 14 years ago. The moral high ground hasn’t helped - just like stories coming out of the Treasury at the moment that Reeves is checkmated everywhere she turns - let alone “freebiegate” or whatever. The optics are bad and the popularity ratings have plummeted.?
The others got kicked out, rightly, for the complete mess that was the last 5 years. My view is still that the “losers” i.e. primarily Sunak and Hunt didn’t do a terrible job - Sunak was a weak leader but far from clueless. Hunt played the game even though I would have liked to have seen him be much bolder, let’s remember he was a nightwatchman after a man who would have been better off being replaced by a random number generator, or a tub of lard, or simply no-one at all doing the job - so to an extent his hands were tied, although I think Hunt was always that candidate whether he followed KK or not.?
Right now, we are simply left with the “two buttocks from the same behind” argument. “They are all at it”, etc. etc. This is of course a distraction and their competency matters significantly. The NIESR forecast of 0.2% growth for Q3 really means we expect another zero print in September as we play a waiting game for this horrific budget, which almost certainly won’t be as bad as everyone thinks. October could see a contraction of course, if business really stops and waits (however, talk to professional services firms - they are BUSY as exit activity has been generated which should move services GDP onwards, to be honest). Then think of all the leaving parties for the ultra-nets leaving the UK because they’ve had enough. I’ll talk about this more in the deep dive.
How did we get to 0.2% for August? Services up 0.1%, still post-election limp and also “August being August” I’m sure. Weather was also disappointing as we know and that will impact August spending. Production was up 0.5% and construction up by 0.4%, looking healthy, making the services 0.1% into 0.2% for the economy as a whole (due to the splits between services/production/construction).
Also - just as the reduction in inflation helped massively in Q1 and to a lesser extent in Q2, the rise back upwards (even though it has so far been small - October’s number won’t be great depending on what happens to oil, but we know we had 10% on household utility bills on October 1st) - will not help the real GDP figures and act as a suppressant rather than an accelerant.
There’s not much to learn from the minutiae of services and production - however I will dwell briefly on construction. A 1% increase in the 3 months to August 2024 is in line with the very positive construction PMIs that I’ve been reporting on for several months. Good news in the sector - mostly NOT concentrated in resi housebuilding, though - specifically civils and commercial works. Infrastructure new work up 2.7% on that 3-month period, non-housing repair and maintenance up 5.6%.?
Only in August - rather than the quarter as a whole - did things start to move in private new housing - up by 3.4% after a long lag. The PMIs still suggest it is the laggard of the three sub-sectors in construction, though.
There are also quite a few more revisions in this month’s data - GDP revised by 0.1% upwards in March this year, 0.1% downwards for April and 0.2% downwards for May. This trimmed the Q2 growth from 0.6% to 0.5% as above. This doesn’t “look” like it adds up but these are generally rounding errors (so 0.2% here might mean 0.16%, for example).
So. We accept 0.2% with open arms. Elections mean disruption. As it goes and as it turns out, budgets actually mean more disruption than elections, when you speak very naively and bearishly to all the main actors in the economy months before delivering one (and then backpedal furiously, but no-one really wants to listen).?
In conclusion - much more bearish on growth than I was, perhaps 0.5% adrift of my most hopeful prediction for 2024 at any point. Still far, far closer than the idiots who were forecasting 0.5% growth for the year when Q1 had already shown 0.7% - I still can’t get my head around why they get paid for forecasting such tripe.
The yields, then, or the subject I’d prefer to avoid at the moment. Since we dipped under 3.5% around a month ago on the 5-year, a triumphant and happy day, things have gone wonky. A quick word on why.
The international bond markets don’t yet trust Rachel Reeves. The feeling - behind the scenes - ethereally, that no one voice elucidates, but you can just “read” in the air - is that she might spend big, meaning a bigger black hole than she has already alluded to. I’ll go further - it’s a huge mistake if she doesn’t. My view is that she WILL do this, and will deliver it with some element of confidence and skill - by changing the fiscal rules or at least interpreting them differently.
Let’s be clear. The budget speech in March 2020 was under-analysed at the time. I can’t really justify going back now and line-by-lineing it because I don’t believe it is a good use of everyone’s time, but my sense of it is this. It was a mess because there was a draft speech of what Johnson and Sunak wanted to do, and then it all had to be amended (but half of it was left in) because of the pandemic and all of that becoming very clear in terms of what was happening in Europe at the time. It was the 11th March 2020, for context.
One of the key promises it included, following on from a manifesto that no-one read because you either voted for the buffoon with the “great hair”, or against the neo-communist Jeremy Corbyn (or some, of course, with Corbyn) - was a massive spend on infrastructure. ￡640bn.?
Here’s the relevant quote from the bit that was drafted before the pandemic REALLY hit: “By the end of the parliament, public sector net investment will be triple the average over the last 40 years in real terms. In total, around ￡640 billion of gross capital investment will be provided for roads, railways, communications, schools, hospitals and power networks across the UK by 2024-25”
Oops, I think might be the appropriate line. Now listen - I hear you say - there was a pandemic, mate. The issue that there was, though, is that we could have borrowed that ￡640bn at nearly no interest rate at all, in 2021. If we had timed it brilliantly, we could almost have been paid to borrow it (yes, really - long yields went negative). Make no mistake - if we HAD borrowed ￡640bn that would have move the yield premia up - BUT if we had shown an investment case (and it isn’t hard to do that when you are paying 1% or less, which we would have been) - we would have got the money. Could have had 50 or even 100 year bonds - plenty of countries DID have the vision to do this. A truly intergenerational opportunity.?
Ideology stopped them. I’m the first to slam the ideology of the left when it is utterly non-sensical. Rent controls are the easiest example. I’m not politically wired, and so I have no issue slamming the ideology of the right when it is wrong-headed as well. Austerity was essential after 2010 - the way it was enacted was damaging, unhelpful, anti-growth and misguided. Not spending the money to enact the best plans that Johnson ever had was a gigantic opportunity missed.
Carrying on those mistakes would be an inter-galactic error - instead now RR is going to struggle to get ￡50 billion rather than 13 times that. And there’s been a fair bit of inflation since then, as you know.?
The UK infrastructure investment is so woefully behind other developed nations - The UK has been BOTTOM of the G7 league for investment (overall, not infrastructure) for 24 of the past 30 years. That’s an utter embarrassment. We can’t go on like that. You can see that covers nearly exactly 50/50 Blue and Red rule - just like in housing, they are both as bad as each other.?
Reeves has a simple problem. She needs to do what she said she is going to do, and we need REAL growth policies.?
That’s a long segue back to the yields, but hopefully a worthwhile one. We breached that psychological barrier of 4% again on the 5 year gilt - which is too high in my view. Opening at 4.052% on the week we closed at 4.071% - so we’ve drifted nearly 60 bps the wrong way in a month. Yaa boo sucks, is the technical analysis.
Thursday's close on the gilt was 4.084%. The swaps continued at what can only be described as a chasm below the gilt - happily. The 30-ish basis point discount that has emerged has been preserved. Fantastic news, to be honest. It’s still 20bps up on last week, though. 3.796% was Thursday’s close on the 5-year SONIA swap.
That leaves our 5-year money at about 5.8% - and, I’d like to add to this section - that leaves our “investment-grade” rental yield at about 8.29%. Where do I get this number from? I allow for 30% costs of management and maintenance on a property. Looks high? Looks safe? Remember a couple of weeks back I talked at length about Peabody housing association who shared that they spend nearly 80% of their rents on maintenance and management of their properties. Their rents average 137 per week - 594 per month - and so maintenance and management is costing them 475 per month per unit.?
That looks insane - and shows you how much more efficient the private sector is than the social sector, sorry folks. No-one reading this - I don’t think - will be needing to spend 475 per month per unit on their properties. However - let’s have a pop at doing the exercise properly.
领英推荐
Roof - lifespan 80 years - today’s cost 7k
Windows and external doors - lifespan 50 years - today’s cost 5k
Fascias and soffits - lifespan 40 years - today’s cost 2.5k
Wiring lifespan - 40 years - today’s cost (incl redec) 5k
Bathroom lifespan - 25 years - today’s cost 4k
Kitchen lifespan - 25 years - today’s cost 5k
Flooring lifespan - 12 years - today’s cost 2k
Decoration lifespan - 6 years - today’s cost 2.5k
Boiler - lifespan 15 years - today’s cost 2.5k
Other structural contributions/issues (pointing. Damp works. Plastering) - say ￡150 per year reserve fund??
Listen - I’m making these numbers up (educated guesses). This isn’t data I have at my fingertips (if anyone does for a portfolio, please get in touch - I’d love to have it). But you see my logic. That’s just maintenance, remember, not compliance, insurance, etc. etc. Amortise that lot and you come out at ￡1,635 per year or ￡136.25 per month. Management market-rate wise, according to ARLA, would come in at 12% + VAT but the lightest bit of negotiation would get you 10% + VAT from most agents and lower if you have volume.
Let’s say your average rent is 1.5 times Peabody’s - let’s say 900 per month. 136.25 per unit on maintenance based on the lifespan of everything. Another ￡40 provision for bits that come up (leaky taps etc. etc. that aren’t factored in there). 108 on management fees. 40 quid per month on insurance. Compliance amortised per year - EICRs with upgrades, Gas safe with upgrades, etc - Our average EICR on older stock that we buy tends to come back with about ￡800 of work (then less as time goes on as a rule) - so let’s be cautious. ￡17 a month allowance for EICR. Let’s put in ￡20 for a boiler cover policy. If you want to build a reserve between now and 2030 for ￡10,000 of works (the current best guess) - which would be sensible - based on EPCs - that would be another ￡140 per month. A reserve is only sensible business provisioning anyway (if you are at C+ at the moment, you don’t need that of course, but we know the average rental isn’t).?
Oh dear. That’s ￡501.25, so perhaps Peabody isn't wrong (take out my reserve for EPC and it is ￡361.25, which is more like a running cost). As rent goes down, the management fee goes down but the rest remains the same. That number works out as 40% of rent (at ￡900) - not 30% - but my number even over recent years with aged stock, on the basis that we “do the works” - is 30% not 40% (we are beating some of the prices, of course, because of volume, and do have some other edges).?
Average rent is of course higher than ￡900 but you see why a 30% figure looks about right, and that’s where my “investment grade yield” comes from. If a unit isn’t investment grade - then when it comes up for remortgage, or ideally before - you need to be thinking about what you are doing with it, in my view. All options need to be on the table - active asset management, sweating asset harder, disposal of asset.?
Rather than my 8.3%, the average number that is being touted at the moment is more like 7.5%. Now, of course, not everyone will be leveraged to 75%. The average mortgaged landlord is mortgaged to about 63% LTV as it goes. (Only 50-60% are mortgaged depending on which numbers you trust, the other 40-50% are unencumbered).?
There’s a ton of stock under that 7.5% yield, particularly as you get further South and East of course.
Anyway - a little segue to give a little more insight that I want to try and keep in on a weekly basis. It seems like a good addition to the constant “sweat” of the gilt and swap yields.?
OK - let’s get the waders on. The budget is coming up and my goodness it has led to a flurry of activity. I spend 0.00 seconds per day worrying about how my tax position will change - I’m a price taker (we all are) in this market, so spend more time making more money and worrying less. The “old school” attitude of “if I pay ￡1m tax a year it's a wonderful problem to have” drives me forward. With a growth strategy, tax is the least of your problems anyway to be honest - cashflow is a different matter.?
Rachel has had a bit of a lesson this week, and reminders even from the Guardian. Norway - here we come (we love a Scandinavian lesson, don’t we, especially if we reside somewhere near the left). They have a wealth tax. They are also minted anyway, as you will know, thanks to their gigantic sovereign wealth fund as they invested their oil surpluses whereas we decided to repatriate them in real time with a fairly gigantic welfare state, NHS, etc. etc.
?It’s a choice - that’s the choice we made versus the choice they made (the counter to that is that they also suffer much higher income taxes in percentage terms, so their public services were also sufficiently funded in the first place).?
The wealth tax is on people that really aren’t that wealthy at all (and remember, that’s how tax works). Several hundred years ago tax was introduced on the rich. Nowadays, the meaningful tax - the vast majority - is paid by the top paid 80-90% in society. Not the top 0.8-0.9% as it was first pitched. Income tax on everything above ￡12,570. VAT on basically everything (yes there are exceptions). Want to raise big money? You have to do it on Income Tax or VAT on the masses. Yes, the top 1% pay 30% of the income tax. That’s a lot and it doesn’t feel like there’s a lot more to go before you are shearing the sheep one too many times. I’m not sure what percentage of the VAT they pay or whether that data is available. That’s the end of the debate - the rest of these black holes are smoke and mirrors.
Norway, anyway. The wealth tax has existed since 1892. Scandalous, you say - but then for the past 10 years there has been no inheritance tax. So - pay it while you are around, but die safely in Norway in the knowledge of assets passing on. As so often with international comparisons, it is complicated. Wealth tax is paid on net assets above ￡125k (personally, you’d think people would be getting loans so that their net wealth was 124,999, wouldn’t you - and I’m sure some do!)
They moved from 0.85% on that net wealth above the relatively low threshold, to 1.1% on wealth above ￡1.6m (which feels a lot more like “wealth”). This 1.1% rate was actually the same rate as 2013, but this move led to a “flight of the billionaires”. It is more complicated than this though, because the flight included moves to Switzerland which has a more aggressive wealth tax of its own!?
So - what’s going on there when you drill down? CGT. The unwritten rule, really, is that you EITHER have CGT, OR you have wealth tax. CGT and IHT are inherently linked, because IHT is a bit like CGT after death. CGT dies on death, but the crystallisation event IS death, and so it becomes IHT (tax specialists, please be kind. I know I’m not a CTA nor am I trying to be one).
Norway instead has been a bit naughty. They do have CGT - and have had since 2006. They also had a form of “exit tax” which has been proposed for the UK (and actually does EFFECTIVELY already exist as you need to repatriate for 5 years, although you don’t have to wait for 5 years to do the sale that avoids the CGT, just that the tax becomes due if you become resident again within 5 years).?
?That exit tax has been changed. It now applies INDEFINITELY in Norway since November 2022 and is an enhanced rate of CGT - 37.84% on the sale of shares. Ouch. So what happened? A LOT of people legged it before 29 November 2022 on this basis. There’s more sensible solutions here than just taxing the wealthy out of the country (Norway lost about half a billion in tax revenue when they expected to raise quite a bit from raising this wealth tax, of course).?
Canada allows assets to be rebased on arrival - a bit like incorporation relief, if you understand how that works. If you have properties that you paid ￡1m for, many years ago, that are now worth ￡5m, and they are in your personal name - then if you incorporate you can rebase those assets at ￡5m within the company (and then sell them without incurring corporation tax). The capital gain isn’t “lost” but it is transferred into the shares - it washes through, if you like.?
Another alternative is that when you announce a change, you do it that way. Norway gave people a heads up, and so they fired off abroad. No notice - no ability to do that. Tax hostages. Aggressive.
The issue, then, was tax policy being complex and overlapping, to a large extent - but it was a real-terms example of what happens if you try to squeeze the lemons too hard. They pay plenty - whether they pay the “right” deemed “percentage” (mostly based on uncrystallised gains) is the wrong question. How MUCH tax do they pay? That’s the right question.
There’s this inherent idea that the percentage system is “fair”. Why? Just paying more and more, from a percentage point of view, even as you pay more and more tax isn’t fair. It’s the opposite of fair. It’s Governmental greed. There’s numbers (up to about 25%) that people will pay “happily” (mostly, of course everyone is different) that will MAXIMISE the tax take. THAT should be the job of the Government. Maximise it.
Personally - I’d be looking at big tech to foot the bill as they underpay tax drastically compared to their societal costs. We do nothing and talk far too little about the externalities, as we economists like to call them, in terms of the scars on mental health aside from anything else. They need hardcore regulation with teeth - fast - or a tax stick to beat them with. Or both. Tax THEM on turnover, not the landlords! I’d also get stuck into big food (no, not eating it…..) - the sugar tax was a magnificent success that needs further rollout.?
Be done with it, put income tax back up to 32% or even 30%, where it should be, at the basic rate. Scrap national insurance - don’t make workers subsidise everyone else. If you have income above ￡12,570 - pay the tax. Much more effective. But of course she “can’t” because she’s painted herself into this stupid corner, because the entire party was so scared of saying what they already knew before they got into power - Jeremy Hunt had pared down and fired every bullet he had in the chamber to try and either keep the Tories in power, or shaft Labour if they did win. This is why I can’t be political - I’m too honest. We all knew that before, we knew it at the election and we knew it now. If we didn’t, we weren’t paying attention.?
So, Rachel, there you go. Change the rules, with the blessing of the Supplement and many other economists far more pre-eminent than myself. Explain it well, and we will be fine. We know you aren’t Liz Truss - we are worried that the infrastructure spends will spiral out of control of course (average Government major project goes 75% over budget and 67% over time, regardless of the colour of Government) - but we desperately, desperately need investment.
Before I close that section - one more shoutout that is positive. One more decent chess piece on the board. Starmer has appointed Poppy Gustafsson OBE as Minister for Investment. Let’s get the context right. This International Investment Summit - starting Monday 14th - is a fantastic idea at a bloody ridiculous time. 2 weeks before the budget - it just makes them look naive and stupid. However - it's a regular thing and they can get it right next year - you’d hope.
The headlines thus far have been that Musk isn’t invited. That’s also bloody stupid. He’s been a right idiot himself about the UK over recent times, but we all know now that he spews nonsense for clicks - that’s his new business, after all, even if he has blown off about $30-$35bn so far on X because the brand is now toxic as far as mainstream large caps are concerned. He probably wouldn’t have come - but with projects such as potential gigafactories in Bridgwater, be the bigger “person” for goodness sakes.
Forget Elon, anyway. We all know he’s as mad as a box of frogs. Poppy. Ex-CEO of Darktrace, from startup at CFO level to COO and then CEO and a successful listing - her track record is without question. This looks more inspired than James Timpson - but it is RISKY. If she, or he, gets fed up because of the BS of the political system or the civil service - will they stick it out? This is public service at the highest level. And Starmer ends up with egg on face. Not sure there’s any more room for any more eggs at this time, but there we go.
Anyway - I’m going to be positive about it. These are ABSOLUTELY the sort of people UK PLC need at the very top level. I hope they pay Poppy (and JT) the respect they have both earned and both deserve. Fingers crossed because we need something to sort this woeful underinvestment situation out.
OK. Before I close for the week I wanted to look at the ONS release from this week about Energy efficiency in England and Wales on housing. This is an annual report, and will be informing Mr Miliband (if he takes information on board, I’m not convinced he does) and parliament about what progress has been made (or not!).
Here’s the tale of the tape: The median EPC scores (on live EPCs so up to 10 years old) is 68 in England and 67 in Wales. A C starts at 69 (but this is a classic example of an arbitrary scale). Is a 68 (or a 67) horrifically worse than a 69 (ooo-er)? Of course not. Things are largely clumped at the median level - the London median score is 70 - the West Midlands and Yorkshire stack up the “worst” regionally at 67.
New dwellings have a median score of 84 in the past 5 years - this is compared to 82 (England) and 81 (Wales) in the 5 years to 2013.
73% of new dwellings in London in the past 5 years had community heating systems as their main fuel type. I found that interesting because some mortgage lenders don’t like them very much (although they are more comfortable with them in London than in other parts of the country).?
We will end up working towards the nonsense of an arbitrary cliff-edge between Cs and Ds, as a rule - if the scoring system was moved down by 5 points (and one way or another, however this is “fixed”, that’s absolutely one of the outcomes that I expect at some point) then so many more properties would pass the requirements.
Here’s another interesting piece of detail. Flats and maisonettes are the most efficient (one of the reasons why London measures up, if not “the” reason). The median score for a flat is 73. Social rented homes come next. 70 in England, 72 in Wales. THEN PRS stock - 67 England, 65 Wales. THEN owner-occupied homes (two thirds of the stock, remember) come in at 65 in England and 63 in Wales.
A couple of other interesting tidbits. Heating in new dwellings. Outside of London, INCREASING proportions of dwellings have gas as their main fuel type (comparing 08 - 13 to 19 - 24). So much for phasing out gas boilers eh? The ONS claim this “may” be down to “better recording of fuel types”.?
Now. The situation is likely a bit worse than this - because owner-occupiers invest LESS in energy efficiency than landlords of all types. That much is clear from the above. Not LOADS less, but less. However, only 69% in England and 66% in Wales have had at least one EPC registration since 2007 (when records began). The other 31-34%, you can pretty much guarantee, WON’T be MORE energy efficient - they haven’t been rented, or sold, in that 17 year period. They are likely owned by older owners (definitionally they are 17 years older than a first time buyer on average, for example), and are more likely to be less energy efficient.
Plus - we don’t even KNOW how efficient (or not) one third of our stock is. Wow. Houses built before 1930 have a 60% coverage of EPCs in England and a 57% coverage in Wales.?
So - we aren’t as far off - at the median - as possible. The tweak of the scoring system that’s coming - after consultation - or the complete rip-up and introduction of the Home Energy Model - which I cannot find a single reference to from Miliband - will have the DESIRE to get more strict, but I wouldn’t be surprised if the system was somewhat “gamed”.?
The bulk of the problem is getting owner-occupiers to invest in energy efficiency, let’s face it. Labour were somewhat sensible about solar when last in power - perhaps they will make some good decisions on that front. We live in hope.
One more little segue before I go - I wanted to say “thank you” to Danny Inman and his Prosperity network - I enjoyed a great day on Friday delivering a mastermind session to his experienced and engaged audience up in Warrington (or “the Chelsea of the North”, as he prefers). Over the years I’ve been kept at significant arms length from some of the networking organisations who’ve struggled to get their heads around the “what, where, why” of Partners in Property and Propenomix. Danny has been much more open-minded and I’m looking forward to future collaborations between PIP and Prosperity. If you aren’t already following Danny on socials - you should. He talks a lot of sense, and sells zero smoke - it’s all substance. Danny, Pip, and Prosperity - thanks for welcoming me so warmly.?
Before I go, SAVE THE DATE for the next Property Business Workshop - Thursday January 16th 2025 (Yikes), with some great subject matter - planning, efficiencies, and also financial accounting and bookkeeping - not “how to use Xero” but how to ensure reporting is SET UP correctly and how to monitor it on an effective, ongoing, monthly basis.
There’s only one way to deal with all of this ongoing noise and excitement - Keep Calm, ALWAYS read or listen to the Supplement, and Carry On!?
3x Founder | 25M B2B & SaaS sales | Startup Founder - Startup Consultor | EMEA US LATAM Business development | Lead Generation | Artificial Intelligent | Sales B2B top performer since 2012 | LinkedIn Social Selling
1 个月Is good time ti buy? haha
The coolest lawyer you’ve ever met | Corporate, VC and M&A lawyer for SaaS founders | I help SaaS founders draft, negotiate, and close deals.
1 个月Surveyors waking up... things must be getting real.
Turning organizational challenges into thriving work environments with sustainable HR solutions | HR Transformation Specialist | HR Consultant | Ex-GAP | Ex-Cipla | Ex-Schindler
1 个月Looks like things are turning around and hopefully for longer time Fingers crossed Adam Lawrence
a?g?e?n?c?e? (vrais) e-commer?ants aux services de ton e-commerce | Multi-expertise : fondations (webdesign, CRO), acquisition (ads, seo, emailing), rétention (newsletter, social media) + studio créa | COO @MIG
1 个月Ha! Looks like even the surveyors are waking up now. Keeping calm and carrying on through all the property ups and downs. Adam Lawrence