Property Tribes - Ep4 Property Topics Going Head to Head with Paul Mahoney - City v Suburbs - Nova

Property Tribes – Ep4 Property Topics Going Head to Head with Paul Mahoney – City v Suburbs

Vanessa Warwick:

Well welcome along to day four of our theme that we care on Property Tribes, it’s property topics, going head to head it’s powered by our friends and colleagues at Nova Financial. And joining me all this week is Nova MD, Paul Mahoney. And Paul, before we get going with today’s topic, I thought we could just recap on what the week’s all about because when you and I were formulating this week, we wanted to really highlight how powerful and positive it is to have robust debate, because it really does help tease out the issues. And certainly when you’re starting out, you may not be sure of how you feel about certain issues. And I think one of the really powerful things about this is that you can have a really full on debate and you might just pick out one golden nugget from that debate, but it could change a lot of things very positively for you.

Paul Mahoney:

Yeah. Look, I completely agree. I think your healthy and friendly debate is always a good thing. And you need to pick what you feel most comfortable with, and maybe you might take certain points for both sides of the argument. Aside from that, I think it’s a bit boring when people always agree with each other on things. So hopefully this is slightly more entertaining and slightly more thought provoking.

Vanessa Warwick:

I agree. I think one thing that we all have to fight against is cognitive bias. And I know speaking for myself, I struggle with that, sometimes I have very strong opinions and views on things that have been formed over a long period of time. You can get stuck in your way, stuck in a rut in your thinking. And I think one thing about property is that it is, particularly since post COVID locked down, it’s changing. It’s very fluid, it’s fast, there’s a lot of velocity of change. And I think during these kinds of times, it’s even more important that you’re open minded and willing to try on new ideas and new thought processes and ways of thinking.

Paul Mahoney:

Absolutely. There is an awful lot that has changed in the UK property market over the past five years. And therefore strategy that worked five years ago may not work at all today. And strategies that didn’t work then may work fantastically well today. So I agree with you on the cognitive biases, that if people are too stuck in their ways. They can end up becoming outdated and no longer making their property strategy work for them. So being open minded, listening to new ideas, listening to the logic that supports those ideas, I think is a sensible thing to be doing.

Vanessa Warwick:

And there’s so much discussion debate, free content out there on social. Obviously Property Tribes is a perfect example of why you can come to debate and learn and grow. But you yourself at Nova, you have a lot of educational resources as well, don’t you?

Paul Mahoney:

Yeah. We’ve got an awful lot of education, free educational resources on our website and obviously work with people on a daily basis to help them determine what’s going to work best for them.

Vanessa Warwick:

Yeah. And I think we’ve said all along throughout this week, that property is not a case of one size fits all anyway. So everything that you need to think about in property, you need to put that in the context of your own financial position, your own attitude to risk, how much time you have to dedicate to it, and most importantly, what your own personal goals are, because they’re really what will determine your personal way forward.

Paul Mahoney:

Yeah, no, I completely agree. Everyone’s situation is different, different things work better for different people. And I think that’s one of the hard things to do on your own, especially… Well, when you’re starting out, it’s hard when you’ve got experience, I think it’s just as hard because as we’ve just said, you’ve got experience with what has worked for you and therefore you might be less open to new things that could work for you, so I think it’s an ongoing process.

Vanessa Warwick:

No, it definitely is. Now today we are going to talk about the suburbs versus the city. I’m in the blue corner with the suburbs and you are going to speak on behalf of investing in city centers. And now my view, a little bit goes back to our debate about houses versus flats. And I am a big advocate of two and three bedroomed houses in good streets with good proximity to transport links and good leisure amenities within a good school catchment area. And I think very importantly since COVID-19 with a good garden or outdoor space in the vicinity. Those are always my preference because they attract families and families tend to put, or certainly most families that I deal with want to put down roots. And certainly know that they’re going to be staying in that property to put their child through the local school. So my feeling is that those properties in the suburbs tend to attract a tenant that’s going to stay for a long time and who just doesn’t want to be right in the city center, wants to have a certain quality of life, with the benefits of the city, but also being a little bit out in the suburbs. So that’s really my main reason for choosing to represent the suburbs on this debate.

Paul Mahoney:

We tend to have more of a preference for city centers or very surrounding peripheries of the city center. The main reason for that preference, especially when we can get properties at the right price, because I assume some people will listen to this talk from London and think, “Well, how in the world am I ever going to buy in central London?” And I wouldn’t encourage you to, but again, there are other places in the UK, aside from London and places, for example, like Birmingham, Manchester, Liverpool, you can buy in the city center at a reasonable price, or at least the very close surrounding areas. And the reason we like those areas is that’s where we find the focal point for depth in things such as strong tenant demand, population growth, a broad range of industries, and therefore providing a very broad range of employment, facilities and mentees, and infrastructure.

Paul Mahoney:

All of those things tend to be at their highest in the city center. And the further you go, the more they tend to thin. The further you go, the higher vacancy rates tend to rise as well, and therefore the larger times between tenants. So yes, although you may retain the tenant for longer and you probably will, we found that generally the turnover time for tenants with centrally located pumps tends to be two to three years, probably two and a half years or thereabouts. Whereas with families, it’s probably much longer, but the time between tenants is a matter of days, and therefore there will be some costs in finding the new tenant, obviously, but you replace them quite quickly. The type of tenant, some people… I’ve been crucified for this in the past, in that I’m not in property to provide social benefit, I’m in property to make money.

Paul Mahoney:

And that’s the stark reality. I’m very honest about that. And that’s our approach. I think people who have money and I think I might, maybe I’m in that status should contribute. I can strongly contribute to charity. There’s a chapter in my book about that. I’m a big advocate of that, but I think you should separate making money to giving back because it’s better to make it first and then give it back then to try to give back while making it, in my personal opinion. And therefore I’m generally targeting young professionals who maybe don’t need help, but I’m providing a house for them to live in, a nice place for them to live in. They’ll pay the rent, they’ll look after the place and relating that to the current situation, I haven’t had any issues with collecting rent throughout COVID-19 or lock down because of the types of tenants I target. And I know that a lot of other landlords have.

Vanessa Warwick:

Okay, Paul, I think we always say that we can’t talk in blanket terms anywhere because there will be cities in the UK where flux in the center do extremely well. And then there’ll be other cities in the UK where maybe they don’t do so well. And vice versa. If we’re about terraced houses in the suburbs, there might be some cities where the suburbs have a very high propensity of X council, stock in [inaudible 00:09:06] estates, et cetera. So really, again, as with anything to do with property, the devil is in the detail and people really need to understand the area, from every angle, to understand where the best place to buy is. And it could well be a city center flat. Of course, it depends on your budget as well, but at the end of the day, we’re only talking in very broad terms because it ultimately boils down to the city itself and intense, due diligence around it.

Paul Mahoney:

Yeah, absolutely. And I think some people do overlook that. In fact, I think Liverpool’s a great example of this in that Liverpool city center has very stark differences in demographics to some areas just a mile out, and you might go a mile North and it’s still a nice area, you go a mile South and it’s a terrible area. And therefore that understanding that location it’s difficult to determine that. So I think that ties really well into your point. Again, relating it back to the point of why we liked the city center slightly further, having more of those debt factors that I mentioned, in our view, creates more safety because we’ve got more sustainability of demand. And what we’ve seen tends to happen in bad economic times, which we may be moving into now, is jobs tend to dry up in thinner job markets.

Paul Mahoney:

Now, I think you might be talking about places that are relatively close to big cities, so maybe that’s not so much of a problem, but areas that are a bit further from big cities where they do have thin job markets and obviously with the risk of job loss at the moment, I would be a bit concerned about having standard buy-to-lets or even short term lets in those locations because if the jobs do dry up and quite often those smaller cities and towns are driven by one industry or even one company predominantly, that could be a big issue because if the jobs dry up, so too might the demand.

Vanessa Warwick:

No, I absolutely agree. And this is even more of an acute issue since COVID-19 19 lock down and you know, all the fallout that’s starting to appear through that, we’re hearing of more and more and more job losses. And in fact, on Property Tribes, we’ve got a thread that has, it goes to a calculator which shows the number of jobs that are being lost through the recession that’s coming because of COVID-19. So I think due diligence has to be even more heightened, but Paul, you’ve been talking about big cities like Birmingham, Manchester, Liverpool, they have very, very property markets and let’s just go to say a town that I invest in, which is Basingstoke, obviously more of a market town does have a lot of employers in the area, a lot of industrial estates and retail parks, those kinds of things, which is good. When I started investing there, there was a massive over-saturation of city center flats, but a shortage of family homes. And I think one of the key ways to ascertain the best kind of area and property to invest in when you’re doing your research is to pick up the phone to local estate and lettings agents and ask them where the demand is and the best streets, the best type of investment, because they have so much local knowledge that you can tap into.

Paul Mahoney:

Yeah, no, I agree. I think that’s a bit of a pitfall that some people make as well as selecting a really good location, but the wrong type of property where the demand isn’t necessarily skewed in favor of that type of property. For example, buying a flat in a family oriented area or vice versa, buying a three bedroom flat in an area where most people want to live in one or twos or a house and there are people living in flats. So you need to make sure… And I agree sometimes the state agents can be a good source of knowledge for those things. I think you need to be a little bit careful with the state agents in my experience because people can walk into an estate agency job pretty quickly without much background knowledge. Now, sometimes the state agents are great experts in their locations, other times they’re not. And sometimes the advice or guidance they give can be quite biased toward trying to sell you something. So you need to be conscious of that.

Vanessa Warwick:

I think so, I do agree with that and we do have a threat on Property Tribes about how to find your way to a reputable agent and how to vet them and to make sure that they are going to be qualified to assist you. I think also one thing that people should do is walk the streets of any area that they’re thinking of investing in because it can change at different times of the day. You can see if there’s a massive traffic blockage when kids are going to school during the rush hour or particularly when I’ve had flats in city centers, I’ve always asked Nick to drop me off at the tube station in London at night when I’m assessing an investment and I’ve walked from the tube station to the flat that I’m thinking of investing in because I want to see as a female, if I feel confident walking alone at night in that area.

Vanessa Warwick:

And I think these are all the little things you can do, put yourself in the shoes of your potential tenant and see because if a female felt nervous about walking home at night, they probably wouldn’t want to run your flat. So that would cut down the number of tenants you had access to. So again, actual a mix of due diligence, talking to agents, doing the research online, you can ask on Property Tribes about local areas from local landlords, but also, walking those streets and getting a feel for what it’s like at different times of the day and night.

Paul Mahoney:

And it’s always a bit of a balancing act, isn’t it?

Vanessa Warwick:

[inaudible 00:15:21].

Paul Mahoney:

It’s always a bit of a balancing act on that point in that, for example, where I live in Deptford, not so long ago was not so nice of an area. And I remember being here three or four years ago and thinking probably my wife wouldn’t feel comfortable walking down these streets at night. Now it’s changing really quickly and it’s probably one of the fastest growing areas for property prices in London. So you don’t want to get into early, but sometimes there’s some room for growth and that’s not just this area. It’s many areas on the fringes of cities where you can see the gastro pubs in the cafes at the end of the street and therefore visualize, “Well, quite soon, they’re going to be here.” So that’s a bit more art than science, I think, but a bit of a balancing act between foreseeing growth and wanting desirability today.

Vanessa Warwick:

No, I think you’ve raised a very good point that to see some evidence in the area that things are improving, there’s that age old adage of look to see where Starbucks are going because they do masses amount of due diligence and research to decide where they’re going to put their next coffee shops or Waitrose, where they’re going, where you can see new retail parks going in with shops. Of course, a lot of this might have changed post COVID-19 because obviously the high street is in decline now, things are changing. It’s very interesting times, isn’t it, Paul? And everybody’s going to have to keep well on their toes and up to date with what’s happening to makes them seem good investments because as you say, what has worked before for some experienced people actually might not be such a good strategy going forwards.

Paul Mahoney:

No, that’s true. And I think the key points there, whether it be Starbucks, Waitrose, it’s more about inward investment into a location, that’s what gives confidence that there has been smart money that has done their research on whether that’s a good place to be investing. And that’s, in our view, always a really good sign. If you can see shops like that popping up, various big organizations that have property teams that don’t spend their money willy-nilly that does give confidence.

Vanessa Warwick:

I think one final thing to look also at towns on the outskirts of big cities, where there’s new transport links and infrastructure going in that’s going to shorten the commute time. And also obviously money going into the area, creating jobs through construction projects and things like that. So there’s still a lot of the fundamentals that we can look to, but we have to think with a post COVID-19 locked down mind now, don’t we?

Paul Mahoney:

Yeah, we do. And just to clarify my point about us liking city centers, I think the Manchester city center is a really good example, the point I’m just trying to make, is four or five years ago, we were investing right in the center of the city and prices. There have almost doubled over that timeframe, have grown substantially and really quickly. Therefore, we’re not investing there anymore because we can’t see that happening over the next five to 10 years. And therefore we moved a little bit out. We can… There’s a very distinct ripple effect in the Manchester city center. And that’s another good example of where you need to change a little bit, go back four or five years our clients were paying 250 pounds a square foot for a property in the Manchester city center. Now they’re paying 450 pounds and that’s no longer in our view a very good investment. So you need to be aware of those things of what’s happened over the past few years, how it’s progressing, and therefore what makes a good investment for you.

Vanessa Warwick:

Absolutely. Well, that’s it for today’s installment. We’ve got our fifth and final installment tomorrow. Paul will be back with me then, but we hope you’ve enjoyed today. And please do engage on the thread below this video, share your views, whether you prefer the suburbs or the city and how you think that’s going to change post COVID-19. Because there has been quite a few early trends to suggest that people are looking to move further out of the city. But I think it’s too early to say if that trend is going to continue to develop, but certainly, changes are a foot, aren’t they, Paul, and people need [crosstalk 00:19:58].

Paul Mahoney:

I think we need to be very conscious of not listening too much to mainstream media because the amount of requests I’ve had for comment on that particular point, and I’ve said, “No, I haven’t experienced it at all.” Journalists go fishing for these things and they create their own stories. This morning being inundated with requests for comment on how is the eviction ban going to affect thing, because that’s what they want to write about. So yeah, there’s a clear reason for a trend for moving away from cities. That’s yet to be seen as to whether it actually materialize. I’m sure some people have, but let’s not take the media for gospel, I think is an important tip.

Vanessa Warwick:

I think so, Paul, and that actually brings it full circle back to what we said at the beginning, which is why debates and discussion is so healthy because it doesn’t have a media agenda or bias behind it. It’s just people sharing their thoughts, just sharing for the sake of sharing, not because they’re trying to achieve anything out of it. And I think we’ll get a better understanding of a post COVID-19 property markets through such sites as Property Tribes and other forums and Facebook groups where people are just discussing things with actual anecdotal evidence from the coal face, so to speak, rather than journalists who want to create this story about how people are flocking away from city centers and want to go to a lovely house in the suburbs with a big garden. So I think you’re absolutely right, once again, it highlights the importance of getting lots of different inputs and mulling it all over and processing it yourself and coming to your own conclusion.

Paul Mahoney:

Absolutely.

Vanessa Warwick:

Fantastic. Okay, well, that’s it for today, hope you enjoyed it. And please do join Paul and myself tomorrow for the final installment of property topics going head to head. We will see you there.

 

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