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How has your work life changed since March 2020 and the beginning of the COVID related lockdowns?
Has that change been dramatic, subtle, or are things much the same?
It has been an interesting time to live through, I’m sure you’d agree.
Most experts have proclaimed rather loudly since March last year that the whole work-life balance has shifted.
I’m not as certain as these experts appear to be. That’s to say, the evidence I am seeing now doesn’t necessarily point to a brand-new work culture emerging that’s here to stay long term.
But we will just have to see how it all plays out.
What I want to point out, however, is that regardless of how this plays out one outcome is guaranteed as part of the current 18.6-year Real Estate Cycle.
That any major change, in the context of the cycle, will result in land taking the gains.
This is an iron-clad law of economics.
This means you don’t need to do something complicated like figure out how the work of the future will look like. You just need to observe the change and act accordingly.
Let me take you through a specific example from the UK market.
Saving the planet….and benefiting your property portfolio at the same time
If you want to sell a house in England and Wales, you need to have obtained an energy performance rating on your property.
This is a relatively new change but pre-dates the pandemic.
The certificate you get grades your property from A to G, with A being the most energy efficient rating and G the least.
According to a recent article I read, homeowners in the UK are finding they are paying more for the privilege of an A rated house.
It’s a “green premium” based on the quality of their energy performance.
Now, consider this work from home pivot.
Many things that you relied upon for your day-to-day work in the office, such as lighting, heating, internet, electricity, printers etc., are now paid for by you.
Consequently, if you are working from home at least part of the work from now on, then it makes sense that the next home you buy is more energy efficient.
That way, you can help both the environment and save on running costs, thus helping your wallet!
But here is something else to think about.
According to mortgage lender Halifax most homeowners in the UK have no idea what their energy rating is.
Andrew Asaam, mortgages director at Halifax, said:
“Increasingly, buyers are recognising that environmentally friendly properties will reduce their monthly energy bills in addition to their personal carbon footprint. With our analysis also finding that greener homes sell for more money, it’s worth seeing what your home’s potential rating could be.”
There is something else going on here.
These ‘gains’ as it were, in terms of lower heating and electricity costs, which are made possible using energy efficient boilers, insulation and the rest, are clearly now becoming apparent.
This tilt towards energy efficient housing has been a trend for a few years now.
But what this article has proven to me is the fact that the result of the extended lockdowns and working from home those gains have now been captured by the land.
And it’s not small change either. The additional price is around £40,000 for certain energy efficient properties.
This is the effect of changes that few people ever anticipate.
I think the learnings and insights that PSE and you provide are breathtaking. Phil’s service really can make a difference once you understand his manner and messaging, which I really enjoy. It was great to see him head out on his own, his expertise and gathered team were wasted elsewhere, so I will maintain the subscription and continue to look forward to the posts. – Len
You can bet your bottom dollar then; the same thing is happening now all over the world because environmental issues are higher on people’s agenda than ever before, and rightly so.
How do you use such information?
It’s clear to me which type of property I am willing to pay for.
Give me the nicest house that also happens to have a G rating.
Why would I go for the least energy efficient rating, you might ask?
Here’s why, from the article quoted above:
“Homeowners at the lower end of the energy efficiency scale are likely to see the greatest returns on their investments, even from making simple changes like switching to LED bulbs or adding loft insulation.”
In other words, they’re suggesting that by buying something with a lower energy rating you’re getting a discount.
And then when you make improvements this will return to you in a capital gain.
This is a new example of an old lesson for property investors.
When it comes to building a property portfolio, look to buy in places the types of property (like suggested above) where the gains are yet to manifest.
And then wait or make the necessary changes to realize those gains over time.
Which means you are in pole position to then await buyers flooding you with offers to buy that same property off you if/when this work from home phenomenon becomes mainstream.
This simple development is key to unlocking the property cycle and being successful with it.
In the coming years, I expect there to be similar initiatives that have the effect of raising property prices.
Energy efficient homes, homes with super-fast internet.
Homes with large gardens. Homes near nice coffee shops for a change of scene.
All of the things that making home working pleasant. And of course, that’s all in addition to the investment in infrastructure that always helps to increase property prices.
Property prices will rise on the back of these improvements. The biggest gains will of course manifest close to the peak of the cycle.
What you need to be able to see is how all these developments plays into the overall cycle.
You might get people who can point out how improvements to an area affect property.
But what you won’t find elsewhere is an overarching and proven method to track the economy like clockwork that you can rely upon to time your most important investments.
Something like the Boom Bust Bulletin.
The Boom Bust Bulletin can teach you the history of the 18.6-year Real Estate Cycle, why it repeats the way it does and identify and guide you to the best opportunities it presents.
Because if there is a seismic shift away from the urban build up towards more work from home arrangements or it flips, and all these current teleworkers must now return to their normal office work life then this will affect any future buying decisions you may have.
I don’t know how this will play out.
I do know though that I can rely upon more than 200 years of repeatable history to guide me regardless.
And nothing can replace the inherent timing the 18.6-year Real Estate Cycle can provide you.
All for $4USD a month, incredible value!
Best regards,
Darren J Wilson
and your Property Sharemarket Economics Team
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