Musings: 8 Megatrends that Property Investors should be aware of

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The Property Voice Podcast - Musings: 8 Megatrends that Property Investors should be aware of

Megatrends are big changes that will affect us over the next 10-50 years. However, many of these megatrends will start to have an impact on our property investment decisions today. Check out this week’s episode to discover what these 8 megatrends are and figure out what might be the equivalent of the decline of the mining industry or the rise of higher education before they happen. We can get ahead of the game if we know what’s coming…

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Resources mentioned

• Property Investor Toolkit – here is the book link on amazon.co.uk & amazon.com in case you would like to get yourself a copy to accompany this series
• Your Voice - Thanks to Andy from Trusted Agents.org.uk
• Shout Out – 3 resources on megatrends to follow up:
  • Forbes magazine – Top 10 megatrends of the decade
  • PWC - 5 Megatrends
  • KPMG – Future State 2030

Today’s must do’s

1. Think about these Megatrends and how they could shape our property investment business - should we make some changes, or potentially have some contingency plans in place? Add looking at future trends into the annual review of your property investment business strategy
2. Subscribe to & PLEASE rate the show in iTunes…and while you are at it please help us to spread the word by telling all your friends too!
3. Send in your property stories, questions or moans to podcast@thepropertyvoice.net and we will try and feature YOU on the show too!
4. If you would like to, grab yourself a copy of the book: Property Investor Toolkit (link in Resources above)

Get talking!

• Join in the discussion, either here in the comments section below, or anywhere else on the Blog
• Start a conversation on Twitter with us @PropertyVoiceUK or on our Facebook page

Transcription of the show

Hello and welcome to another edition of The Property Voice Podcast, my name is Richard Brown and as always it is a pleasure to have you join me again today. Now, the idea of a musings mini-series is that the topics are random and top of mind and today’s topic is definitely random and some of you may be thinking when you hear it: how is that top of your mind Richard?

It’s all about Megatrends – these are the really big changes that we are already and will increasingly face in society over the next 10-50 years. OK, so some of us might be saying, I don’t really care what happens that far down the line…I mean we may not even be here by then! But trust me, many of these megatrends will start to have an impact on our property investment decisions today and if we have anything of a long-term or legacy goal beyond our time here, then they definitely will. So, it is a big topic for sure but I will attempt to boil it down to make it relevant for us and our property businesses at the same time. Let’s say that this is still a high-level view, however, so I could return to the idea later and go into further detail – I shall base that decision on your reaction and the download figures from this show however.

So Megatrends is our big topic and trust me when I tell you that it does have a bearing on us for sure. Then, I have a combined Your Voice & Shout Out contribution today in the form of a voicemail from Andy, who will be telling us how we can use the services of his not-for-profit organisation to better equip ourselves in evaluating online letting agents by looking at their reviews. If nothing else then, a very practical tool to complement a fairly strategic topic. Here we go then with Property Chatter.

Property Chatter

Megatrends are the major shifts that will shape our lives in the future. In compiling the content from today’s show, I have researched content from Forbes, KPMG & PWC among others and I will provide links to some of these articles in the show notes for you if you.

Big businesses and consultancies are spending significant amounts of time and money in identifying and then understanding the big issues, or megatrends, that will affect us in the future. Why is that? Because it will uncover opportunities and threats to their business that’s why.

We, of course, are not like Google, IBM, Siemens, Facebook and Amazon, who are some of the big names that are betting their future results on some of these megatrends. However, as a small property developer that I know once said to me…I am just following the money…as he looked at what the larger developers were doing and tried to keep up.

We do not always have to be first to market to win, but if we can catch up quickly, then we should do OK. The point therefore, is to be aware of changes that are coming down the line, so that we can at least factor these things into our decision-making.

Let me give you an example. If you knew in advance that the cost of extracting coal, combined with the decline in its selling price would ultimately lead to the mass closure of coal mines…would that affect your decision to invest in places like some of the small towns and villages on north Derbyshire and Yorkshire twenty to thirty years ago? I think the answer might be yes, as many of these towns and villages suffered tremendously economically, which lead to house price stagnation or decline and pressures on family budgets reducing housing affordability generally.

Contrast this then with the Government education policy around 20 years ago, that lead to a surge in university places for students and the resulting rise in demand for accommodation in University towns and cities that followed. Investors in Bristol, Nottingham, Manchester and other cities will testify that student growth fuelled local demand for housing, driving up prices and rents as they came.

So, that sets the scene a little bit then – big ideas of what the future may hold can make a difference, even to our seemingly small by comparison property businesses. After all, our future financial standing may well depend on it.

So after that preamble, let’s dive into these megatrends a little further then shall we.

I am going to talk you through a table that looks at some of these megatrends, there are potentially others that are less relevant to us as property investors, and then will look at some of the key issues that I believe could be relevant to us and then some of the potential consequences to us as a result. As I mention, it will be at a fairly high level and is designed to get you thinking rather than providing a detailed PEST contingency plan or similar (PEST = political, economic, social, technological)

First the megatrends that I plan to cover:

1. People & society
2. Urbanisation
3. Natural resources
4. Technological advancement
5. Globalisation
6. Public finances
7. Rise of the individual
8. Government

Some people may include transport and health into this list among others. However, as you will see, I see these as a component part of some of the areas mentioned above…it also keeps my list down to a reasonable size.

Dealing with them in turn then

Megatrend	Key Issues	Some Consequences for Us
People & society	More people, living longerIncreased immigration & mobilityChanging demographics e.g. smaller household units, alternative working styles, etc	Shared, high-rise & micro livingPressure on land & property pricesHigher housing demand
Urbanisation	1800 2% in cities, now >50%Mega-cities > 10mEconomic strength – towards service economy	People moving to the citiesAccess to good transport links essentialPlanning changes needed
Natural resources	Energy shortagesLand shortagesClimate change	Higher costs of energyAlternative energy and flexible use of resourcesNew building materials (hay house)
Technological advancement	DisintermediationSharing economyAlternative design & build	Bricks & clicks – clicks – pick n mix self-servicesNew competitors – Airbnb, spareroom, etcPosh beds in sheds, micro-units, convergent technology & connectivity
Globalisation	Interlinked economiesChange in competitive landscapeShift in wealth concentration	Foreign investors (indiv & inst) & tenantsLong-term shift in wealth to emerging & renewing economiesOne-world economy – renovate a home with workers from eastern Europe and let it to Asian students, sourcing materials from individuals on the Internet, etc
Public finances	QE/Debt-to-GDP ratio/BailoutsWealth inequality & reduced tax-generating peopleIncreasing cost of welfare (health, education, pensions)	Squeeze on pensions & benefitsPublic outcry & rise of an ‘underclass’Greater reliance on private institutional finance (PPP) but also individual finance (P2P)
Rise of the Individual	Bigger voice through Internet & social mediaPublic protests & referendaLobbying with media power	Public naming & shaming (Cecil) but also rate your LL/EA/LA etc.Aggregation of individual groups into a powerful lobby group e.g. Gen RentMore ‘separatism’ & rise of the ‘Big Economy’ means more power to regions
Government	Doing more with lessRegulation & compliance can’t keep up with change5-year political cycles	Smaller state but smaller service levels to followHigh regulation but low enforcementPopulist policies to re-elect instead of long-term sustainable ones

 

That’s as far as I wanted to take the discussion today, it is more or an awareness musing and is designed to get us thinking about our long-term property investment plans.

What can we then do about this now that we know it?

For example:

• Will we be rushing to by houses in rural villages and smaller towns, or would an existing or growing city be a better bet?
• Does letting to people reliant on welfare benefits look sustainable for the next 10 years, or is there another growth area likely to emerge instead?
• What will the discerning tenant be looking for in their future home – single skinned walls, carbon-fuelled heating systems and low-speed Internet…or energy-efficient smart homes using at least some alternative energy in a high-speed, fibre-optic broadband inner-city area close to a train / tube station?

I hope that you get the picture. Even if we do not start down this route now, it helps to have an eye on what is coming downstream for sure. This way we can either plan ahead or build in some flexibility into our business plans instead.

That’s the point of all this megatrends gubbins really – to make us think a little further than whether white kitchen units, magnolia walls and cappuccino carpets are the only trends to look out for as we move forward with our investment decisions.

And on that bombshell, I shall leave it there for now…

I do want to share with you a voicemail I received from Andy from www.TrustedAgents.org.uk who not only had some nice things to say about us, but also has a useful service to independently rate online letting agents too.

Andy from Trusted Agents Voicemail:

I thought it very fitting to share this with you today as online letting agents are an example of a disruptive technology that is changing the way that we do business. Equally, Andy’s service also gives power to the voice of the individual too, so he didn’t know it when he left us this message but it was bang on topic.

That’s a pretty good indication that perhaps there is something in this megatrends stuff after all…keep that in mind.

There we go another musings in the bag, I hope that has lifted your eyes a little toward the horizon…we don’t want to face extinction now do we? OK, so as usual the show notes are available at our website www.thepropertyvoice.net and I shall leave it there for now, but if you found it interesting, helpful or useful in anyway why not drop me a quick email to podcast@thepropertyvoice.net or you could leave me a Speak Pipe voicemail via the website as Andy did instead.

Thank you very much for listening and until next time on The Property Voice Podcast…ciao-ciao