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Writer's pictureNick Hoffman

“It’s the economy, stupid” was a phrase originally coined by James Carville, when he was working for Bill Clinton's campaign in his successful pursuit of the presidency in 1992.


At the time, the US was experiencing a recession and the incumbent president, George HW Bush, was perceived as somewhat out of touch with the needs of ordinary Americans. Carville told campaign staffers to emphasise the importance of the economy at every opportunity, and even went as far as hanging a sign in campaign headquarters reading “It's the economy, stupid.”


The phrase became a key part of the Clinton campaign and, since then, it’s become common parlance among political analysts and commentators in the UK and the US.


Fast forward thirty years and it seems the UK and much of the wider West have lost sight of the bigger picture and could use some of Carville's clarity and simplicity.


Understandably, there is a lot of focus on inflation at this present moment in time; but looking at the two previous decades and likely the two decades to come, there is a greater economic malaise afflicting all corners of everyday life.


In the domestic news cycle of the last two weeks there have been stories cropping up on a plethora of problems arising in areas as diverse as:

  • The declining quality and failings of public healthcare (e.g. A&E wait times, NHS waiting lists & an inability to access basic healthcare such as GP & dental appointments)

  • The inadequacy of our transport infrastructure and the costly & delayed projects designed to improve it (e.g. Crossrail & High Speed 2)

  • Defence spending and the declining size of the military (particularly in the context of war in Ukraine)

  • Backlogs in the legal system and an inability to process basic documents like passports & visas in an acceptable time period

  • Questions over our ability to fulfil promises made to future generations - be it maintaining the state pension in the UK or entitlements in the US

And all of this comes at a time with near record high levels of taxation (as a percentage of GDP), high debt to GDP ratios, large government budget deficits and interest rates which remain exceptionally low on a historical basis.


Indeed, the UK tax burden is forecast to soon rise to its highest level since Prime Minister Harold Wilson left office in 1970:


Source: Institute for Fiscal Studies

The focus of the news cycle is on immediate issues that have an impact on people's everyday lives. However, these problems are all ultimately symptoms of the overriding disease - namely our anaemic rates of economic growth. More importantly, where is the economic growth per capita (i.e. productivity growth) that would lead to meaningful improvements in average living standards?


Source: World Bank

The truth is that the pie is no longer growing at the rate that it once did. The economies of the UK and European Union have completely lost any meaningful momentum since the 2007/08 financial crisis which is now more than a decade in the rear view mirror.


If the size of the pie is fixed, people will spend more time fighting over how to divide it - thus the high levels of political division, bitter partisan fighting and culture wars raging on both sides of the Atlantic.


More GDP per capita means more resources for healthcare and basic public services, more investment in transport infrastructure, more scope to lower the tax burden on businesses and households. It also means smaller budget deficits and government debt to GDP ratios increasing the amount of firepower available for any future crises.


Average life expectancies have gone up faster than the retirement age. Residents of developed economies across the world are having less children than they used to leading to impending population decline, unless there are significantly higher levels of immigration. If you want to see where we are headed then simply take a look at Japan, where the population has shrunk by 644,000 people in just the last twelve months. Dependency ratios are thus set to increase, exacerbating many of the domestic problems arising from our weak economic condition.


And yet politicians almost seem to have stopped talking about economic growth as a concept. It's as if they think that by no longer mentioning the biggest issue facing the country it will simply go away all on its own.


Nobel prize winner in economics Paul Krugman once wrote that “Productivity isn’t everything, but, in the long run, it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.”


It seems that politicians today view every policy decision through the lens of "will this help us win the next election?". Perhaps it's time to focus on the root cause and not just the symptoms of our collective economic malaise. In the era of doom-scrolling on Twitter and twenty-four hour news channels, is it too much to ask that the media and those consuming it pay a little more attention to the bigger picture?

It can be difficult to understate the importance of good design when it comes to real estate.


Good design doesn't have to be expensive yet it's amazing how few property owners seem to pay any attention to design at all, be it colour schemes, lighting, flooring or fittings. You can't change the location of a property and, in most cases, it's difficult to meaningfully increase its footprint. Design however is one lever that's nearly always available to pull.


In the areas where we own property the difference between a well looked after, well designed house and its badly designed neighbour is currently around £150 of additional rent per month (or +21%). If we look at this on an annual basis and apply a fairly conservative 20x multiple of gross rent, this equates to approx. £36,000 of market value.


I am not talking about wholesale renovations; simply by thinking about the look and feel of the property when making paint, tile, lighting, flooring and landscaping choices can make an enormous difference. Good design is hard to describe in a sentence but you know it when you see it (and so does your prospective tenant!)


Just because the monthly rent is £800 and not £2,000 doesn't mean the prospective occupant won't appreciate (and pay for) good design. They still watch the same TV shows (think Grand Designs and DIY SOS), follow the same accounts on Instagram and Pinterest and they still have the same preferences and aspirations.


Good design has the best ROI of any lever in real estate. A well chosen colour scheme costs no more than a bad one, and the same can be said for tasteful flooring and lighting choices. A little effort goes a long way.


Some useful tips:


1. A good hack for finding relevant design ideas in your area and for your type of property is to look at nearby Airbnb listings. Don't stress the finer details, furnishings and accessories (all our properties are provided unfurnished anyway) but do think carefully about paint colours, light fittings, window coverings and bathroom tile choices.


2. Design of the kind you find in show homes is usually terrible, ages badly and is woefully inappropriate for rental properties. (Think white couches, brightly coloured wallpaper & elaborate accessories.)


3. Faux materials and bright colours don't generally age well - neutral colour schemes work best for walls and carpets. Try to avoid materials designed to look like something they are not (e.g. fake marble, stone & wood) - authenticity is nearly always better and will last much longer before appearing outdated.


4. What looks great today might not look so great in five years' time. Tastes and fashions change pretty quickly so don't try to go for something too modern. Try to go for a timeless aesthetic which will age better (think shaker style kitchens & classical bathroom fittings and tiles).


You do not need to be an interior designer (I certainly am not!) but if you are really stuck then it might be worth spending a couple of hundred pounds to get some professional input. The choices you make can then be repeated cookie cutter style across your portfolio or future acquisitions. That £200 might just be the best investment you'll ever make.

Writer's pictureNick Hoffman

Is it better to buy property in the city centre or the suburbs? To some extent the answer probably depends on who's asking, but unless you're a large institutional investor looking to deploy £30 million or more in a single transaction the answer is almost certainly the suburbs.


I recently wrote about the problems associated with buying leasehold property and it is certainly harder to find freehold property in built up urban areas near the CBD. But there are many other reasons why investing in houses in the suburbs can be a superior investment strategy compared to investing in city centre apartments.


1. Competition: First and foremost is competition. In Manchester city centre for example, you are competing with some of the country's largest and most sophisticated institutional investors.


Pension giant Legal & General owns two of the towers at Manchester's Deansgate Square development comprising over 600 rental apartments. With that kind of scale, the service offering, on site amenities and operational efficiency mean that it is going to be extremely hard for a small investor to compete.


In addition, the cost basis for institutional investors buying 200+ unit buildings is going to be significantly lower on a per unit basis than for an investor buying one or two apartments. In a distressed market the institutional investor can discount their rent to a much greater degree in order to maintain occupancy levels whilst still achieving a reasonable yield. In addition, their enormous marketing budget is divided amongst hundreds of apartments - the small investor simply can't compete.


In the suburbs, you are almost exclusively competing with individual landlords who may own only a single property or possibly a small portfolio. Most of these properties are managed by letting agents who are not especially incentivised to provide a quality service or respond promptly to maintenance requests.


Retired pensioners owning one or two properties may not have the resources necessary to continually invest in their properties and make them appealing to the average renter. A quick look through suburban rental listings online will reveal that a large number of these properties look at best a little dated and in need of refurbishment, and at worst, downright unpleasant. Making your property the most appealing on the street is therefore a relatively straightforward task by investing only a small amount of money and thinking carefully about design choices for things like paint, flooring and bathroom tile.


2. A shortage of new supply: There is very limited new development of houses in well connected, well located suburbs close to transport links and popular amenities. Due to the lower density of housing developments and the fact that the supply of land is fixed, the possibilities to significantly increase supply are very limited.


City centres on the other hand have plenty of brownfield sites where even a small plot is ripe for a fifty story tower with hundreds of new apartments. This imbalance between supply and demand in the suburbs is likely to lead to higher rent growth in the future. Moreover, in the market for city centre apartments there's nearly always something newer and shinier coming down the track. The new build premium you pay for your brand new apartment is going to disappear pretty quickly when an identical tower goes up next door a couple of years later (and it might even block your lovely views).


3. Tenure: Average tenure affects investment returns because the longer a tenant stays put, the smaller your vacancy and the lower your annual costs for re-leasing the property. Tenants typically stay for longer in houses where they have more space and a garden in which to make themselves at home, especially if they have a family and children in a local school.


4. Affordability: A nice two bedroom apartment in Manchester city centre could easily set you back £1,300 - 1,500 per month in rent. With median earnings in the UK of £31,772 in 2021 that would equate to over 56% of a single earner's salary being paid on rent. In the suburbs a two bedroom house might rent for £800 equating to only 30% of a single earner's salary.


Clearly at the more expensive end of the market in city centre apartments the depth of available renters is going to be significantly smaller compared to your average two bedroom house a little further out. The prospects for rental growth are also lower when you are already pushing up against affordability constraints for a large number of renters.


5. Schools & families: The population of Manchester is growing rapidly as new university students come to study in the city by the tens of thousands each year. With a retention rate among graduates of over 50% (Centre for Cities) there is plenty of demand for city centre apartments.


Whilst graduates might rent a city centre apartment for a few years in their twenties, eventually they are likely to have families (and pets!) requiring additional living space, larger properties, gardens and proximity to good schools. As things stand it is difficult to find all of this within close proximity to the urban centre. Increasingly, these urban apartment dwellers will look to the suburbs where they can get much more for their money and a significant proportion of them may choose to continue to rent.


Properties in well located, suburban sub-markets with good transport links and local amenities will remain a strong investment proposition for a long time to come.

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