Member Info for steph

https://www.theguardian.com/business/2017/nov/09/brexit-will-hit-northern-england-economy-hardest-ippr-north-thinktank I just think that medium and long term London can grow well paid jobs and the rest of the UK will struggle. TEF's specialization in the near prime London market is key for me. I accept the short term metrics for TEF do not differentiate it from the sector but there are medium and long term fundamentals at work that will get priced in sooner or later.

Brendon Thomas, MRICS, Tower Hamlets, Newham, Hackney, City, Southwark, Oakland Surveyors, b.thomas@oaklandsurveyors.co.uk - Still fairly decent demand in up to £500,000-£600,000

https://www.standard.co.uk/news/london/golden-age-of-booming-london-house-prices-is-over-warns-report-a3673361.html No crash but not much HP inflation either for a few years. Basically a price plateau. TEF patch should beat this by a couple of % per year due to local regeneration and some remaining "ripple out" effect of now historic price increase in prime. While strong HP inflation flatters short term results it is not sustainable over 20 years. TEF's business model and projections of results for the next 3 years is not based on HP inflation so we should be OK.

It may well be inevitable that the TEF patch of near prime (but affordable for young couples earning under a combined 100k and without a massive mom and dad assist) will need to extend out to the better bits of the commuter belt. I'd follow the new high speed rail lines. Crossrail one and two open up some bits but even older town centre densification schemes within a 10 minute walk of a 40 minute train ride to central London will fit the TEF business model. With the javelin even Ashford Kent is 37 minutes from central London. All but a handful of New Yorkers (those who live in Manhattan) have as short a station to station commute and a majority quite a bit more Ebbsfleet is only 17 minutes from St Pancreas. I'd be very relaxed about TEF picking up a proportion of the 4,000 odd units within walking distance of the Stratford international station. Don't know if land securities has sold those off as yet. 4 big UK builders already have plots including TW and Persimmon. They would be expensive as no planning gain to be had but TEF successfully did the same in Stratford and gave us a big jump up the rankings as a result. Maybe IPRS route would mean TEF don't even have to put up the cash.

I don't disagree with the number but there is the phenomena of "backfilling" which mitigates the loss. IN the great recession of 2008 financial models predicted large losses at Canary Wharf. The econometric models assumed losses in the business and financial services would be geographically evenly spread throughout the uk based on the existing pre crash location of sector employment. What actually happened is that the losses were felt almost exclusively outside of London (both within the UK and from outside the UK). Canary Wharf actually had an increase in employment in numbers as senior staff were cut and backfilled by less expensive and thus smaller office footprint staff who presumably were in (or would have been in) the provinces before. SO more employees jammed into the same tower than before the crash. As TEF concentres on near prime this phenomena is not necessarily net bad for TEF but might be net bad for a true luxury builder like Berkeley. This was because the Canary wharf leases were on average 18 years and high quality. So from an asset management perspective it made sense to end leases that were short. in outdated buildings and scattered and concentrate remaining staff in the epicentre. I am still not predicting net job losses for London due to Brexit. Just a slower jobs growth rate than we would otherwise have had. Nothing big enough to throw TEF off their business model of doubling in size every 4 to 6 years for the next 20 years.

https://www.bloomberg.com/news/articles/2017-10-30/dealmakers-still-like-u-k-best-despite-brexit-ey-survey-shows It is sad we have Brexit uncertainty but London is so far ahead of all the EU rivals that we can absorb quite a bit of silliness at the top and still grow at a good clip the highly skilled and well paid jobs that are the bread an butter of TEF market.

I think there will be a moderate EXCEPTION for the Crossrail areas and for much of TEF's patch which is still enjoying an area specific infrastructure and regeneration bounce.

worrying. Business and market confidence surveys are the best lead indicator. They can catch mood changes before they statistically happen. Second best in terms of forward visibility is rightmoves asking price surveys -which are showing a softened UK market although a mixed picture in London. I am expecting pretty flat London house price inflation over the next 2 years. Perhaps even flat in nominal terms which in real terms is a decrease. There should be a HP bounce when Brexit uncertainty is lifted even if not a great deal going forward. Most business and financial service firms will find a way round the new regulations and keep staff in our EU leading cluster. Most already have EU registered nodes they can use. I think there will be a moderate except for the Crossrail areas and for much of TEF's patch wich is still enjoying an area specific infrastructure and regeneration bounce. Used the Javelin recently and wow what a service to get to Kings cross from the new housing and new economy node at the Olympics park. F,,,ing hell it is only 7 minutes station to station and great comfortable seats to boot. That's faster than Leister Square to Kings cross. Where on the planet in a city ranked as high as London does a new housing area have a 7 minute commute to a new economy employment of Google HQ right at Kings Cross and the rest of central London not far away with a 10 minute tube ride? Google's new HQ in the USA with its massive car parking is a dinosaur in comparison. If an employee is lucky they will have a 7 minute walk from the car park space to the entrance after a nightmare commute on a congested freeway network. It is a pity about Brexit but London has so many advantages we can probably absorb a bit of self harm.

http://lexicon.ft.com/Term?term=ramping 2227 you can't seriously think that us long term holders meet the definition of the term you use. I think on this board we are all quite evidence based and enjoy discussing the evidence even with those who have different conclusions. Certainly the best board for a broad discussion of the fundamentals I've seen. TEF is a bit like Marmite, it's an acquired taste and not for everyone. I think there is "hidden value" not priced in but that is based on my view that the company can grow at this rate for longer and more sustainably than the rest. I absolutely admit against the normal investing criteria there is nothing special about TEF relative to it's peer group nor can this "hidden potential" be shown mathematically. The evidence, such as there is and I admit is debatable, is the unique business model targeted at a unique market niche.

Well of course we should all be reassured by Trump putting us at the front of the queue and then slapping a 200% tariff on Bombardier exports. My odds of a hard chaotic brexit going up a bit. Somewhere between 5 and 10%. The odds of an organized soft, hard or no exit at all scenario now too difficult to call. The hard brexiters who want something like the Canadian option with a few extra bits on the side don't have a majority in Parliament nor in the Country for that. If they crash and burn both a soft exit and no exit at all will be on the table. Interesting times. As an investor I hate political uncertainty. Too difficult to attach odds to politically driven scenarios to make investment decisions.

http://www.bbc.com/news/business-41745129 This trend of taxes or outright restriction for foreign capital to buy into the very limited stock in the sprinkling of top flight desirable world cities -plus the expansion of that international capital seeking a landing does help prop up London's housing market in spite of low yields. Housing in the leading world cities is an asset class with almost no new supply likely to come on stream in the foreseeable future (unlike gold that can be mined at ever decreasing ore concentrations using new technology). Build rates (measured in new build per year over stock for most top world cities) have a ratio of 1/200 or more and the bulk of the new build is obviously not in the fashionable bits which are treated as a luxury asset class. For those bits the build rate is less than 1/500. That is it would take 500 years to double supply. No doubt in a time frame measured in a century or two there will be more genuine world cities attracting international staff and residents on quality of life indicators, many of which may be in China, but for now the key Western ones are all there is and London is top of that pile. They are the result of centuries of accumulated investment both public and private and will not be rapidly duplicated elsewhere.

all the new buy to let TAXES...

Sain, yes the geography of "fashionable" London has changed. Even Islington, Hackey and Tower Hamlets 40 years ago was a brave investment with council grants available to help struggling owner occupiers to do up their rotting Georgian terraces. As TEF operate on the edge of fashionable London their is a time and volume limit to their business model before TEF needs to become more like Berkeley. Lots of infill left for TEF to work it's business model at build rates of up to 5,000 units per annum but there will come a time when they will need to move upmarket a bit. New transport links can bring new areas into the orbit of a good commute to the jobs nodes. Crossrail 2 is very helpful and Crossrail 1 still has many nodes that are underdeveloped and still developable for well below 1000/ sq foot sale prices. 2227 rents dropping is a worry. Yields are already low for anything in London above 500k and drop to 2.5% for stock above a capital value of 1m. London is not unique in this and yet money has flowed for some time into the sector for reasons other than pure rent yield. There are swings and roundabouts for us TEF investors on this. ON one hand it is good that rent increases have not tracked capital value increases. Affordability constraints expressed as multiples of purchase price over earrings are not being breached so long as the job holder is willing to rent. ON the other hand with reduced prospects for capital growth and all the new buy to let investors might avoid London. Personally the arrival of a more professional rental sector for me will replace the chaotic inefficient buy to let landlord market we have had for the last 30 years. We are looking at churn of who invests in the rental market and not an overall reduction. TEF is at the forefront of the new professionalized rental sector. It is a squeeze but the result is a professionalization of the sector able to get a reasonable return out of the low yields on offer. So the fat and inefficiency is being squeezed out of the buy to let sector not the volume. Demand is still there at these price points for efficient operators who can sidestep 10% letting fees, improve maintenance efficiencies and sidestep taxes aimed at individual investors.

trouble is things will have to get much worse for that to be a viable political option. Right now even Ken Clark says Brexit inevitable. Public opinion needs to shift for Parliamentarians to shift.

https://www.standard.co.uk/news/politics/hard-brexit-would-cost-london-more-than-100bn-a3665481.html

While Brexit can cut us off from skilled immigration from the EU that is an unlikely outcome -unless we have a very grumpy split. Employers like the certainty of no immigration restrictions on potential skilled staff but a permissive work permit system for skilled EU workers that is cheap and fast is workable. For less skilled staff London might get squeezed. However less skilled EU staff do not buy nor live in TEF product. Also over the next 20 years automation and AI will greatly reduce the need for less skilled staff in London. Most low and medium priced restaurants will likely move to an electronic menu where you order and pay at your table without assistance. Already starting for fast food. Even bringing food to your table may be increasingly automated and is done now for a gimmick. Back of kitchen functions will get increasingly automated. As mentioned construction sites will get more automated and less labour intensive. London's warehousing will be nearly completely automated. Front of house hotel staff in all but high end accommodation will be reduced and back of house staff will be reduced. SO in some way we need to reduce low skilled immigration to London (both from the EU and from the rest of the UK) if we are to avoid high unemployment for Londoners that might lead to social instability. Our high housing prices certainly deter UK low skilled immigration to London. This has not been the case for low skilled EU immigration from Eastern Europe as at London wage levels they are willing to double up in conditions someone from Wigham is as yet unwilling to do. Even that "economic arbitrage" migration is now reversing itself as conditions and wages improve in the accession countries. What does that all mean for TEF's market over the next 20 years? London's population growth rate measured in raw numbers will not be as sharp as some predictions (all global cities will be in the same trend). Automation and AI will reduce some occupations. However London's shifting jobs market to higher skills not vulnerable to automation will mean that TEF's market under the internationalization and AI revolution we are in the middle of will expand, perhaps more rapidly than currently predicted. Also the TEF market will bear some further HP inflation for some time to come (so long as it is steady and moderate) as the high skilled wage expansion trickles down to the consumptive housing market. Capital (which includes housing assets in key world cities) is in a long term inflationary cycle. There is a lot of money sloshing around the world and limited assets to buy in future industries and future physical land markets. Look at the difficulty Saudi Arabia's new sovereign wealth fund has to buy assets in the new economy. Some is going to inevitably find its way directly or indirectly to London's housing market. Saudi fund is just a small example of a wider problem that benefits us TEF investors.

Lets get this Brexit uncertainty out of the way. I hope it is an EFTA type solution, or even a reconfirmation of full membership, but whatever it is so long as it is negotiated and gives us reasonable market access with reasonable levels of skilled migration for London it matters not a lot. At worst a 0.5% p/a decline in London's growth rate. This uncertainty is doing some real damage though and can only get worse until a deal is done.

The hard brexateers are fearful of any parliamentary vote or referendum to endorse the actual leaving arrangements with any kind of meaningful option to leave things as they are (ie rescind article 50). If they were confidence of their own convictions they would welcome this. It is after all part of "taking back control" to have options. Being forced to accept a Brexit that a majority think is wrong and damaging is hardly "taking back control". It would be a minority imposing on a majority their pet project. Even worse as the minority would be quite elderly in composition and are imposing on the next generation an outcome those under 60 as a demographic currently object to and those under 40 firmly object to. It is a sign that they know the devil is in the details and whatever is negotiated will be a dogs dinner compared to what we already have.

I'm not a big fan of reversing printing money called operation twist. Far better for the BOE to transfer the gilts it has obtained to a long term national infrastructure and housing fund and endowment fund for our top universities. That would be minimally inflationary (more housing supply fully funded for aspirational owners might even be deflationary) and the funds would be huge. Of course the government would have to start paying the coupon on the gilts (BOR forgives this at present) so more headache for the Treasury but what a long term boom for the UK. Imagine all our top 10 universities with endowments as large as Harvard's in the new information age we are about to enter. Imagine direct building by housing associations and LA's going direct to the affordable owned and let sector.

https://www.economist.com/news/briefing/21730406-what-can-be-done-help-them-globalisation-has-marginalised-many-regions-rich-world A bit of a deep think on how globalization benefits London and why for my money I concentrate on a London focussed builder and not one that has a heavy portfolio in our industrial heartlands -no matter what the short term firm specific indicators might suggest. London jobs growth is sustainable but not so for many of the UK's regions.