What caught my eye this week.
There is an interesting article in the Financial Times this week that explains that new build properties aren’t as small as we’ve all been led to believe:
It turns out that, rather than shrinking, new homes have become larger.
The frequently used 76 sq m figure is simply wrong and does not reflect the reality of the recent housing market. A housing market analyst tracked the source of this figure to a report published in 1996 that was based on new builds in the 1980s and early 1990s […] the smallest on average of any period.
Unfortunately, the 76 sq m continues to appear in new articles and reports — a true zombie statistic.
Instead, new homes have actually been getting larger and are now slightly bigger, on average, than existing homes.
Apparently Help to Buy – or Help to Buy Bigger, as wags dubbed it – drove the building of more suburban four- and five-bedroom homes, at the expense of fewer city centre flats.
This doesn’t match what I’ve seen in London, of course.
But hey! It’s a big country out there…
Neal Hudson’s article is full of interesting facts. Give it a read if you’re interested in property (and please consider subscribing to the FT if you read a lot of these search links. I do and it’s a treat!)
Breathing space
With Labour aiming to see 1.5m new homes being built – um, someday – I presume this apparent trend for roomier living space will need to be reversed.
Especially as the listed housebuilders’ focus on making bigger ‘executive homes’ targeting DINKYs to rattle around in might be yet another reason why young people find nice no-frills starter flats so hard to snag.
I’m all for higher-density development. Provided the model is classy areas like London’s Maida Vale or Paris’ famously beautiful mid-rise boulevards. Not the high-rise horrors of yesteryear, obviously.
But I suppose that the desirable urban apartment model might face an uphill battle while lockdown – and the near-universal desire for a bit of outdoor space it inspired – is still fresh-ish in our memories?
Have a great weekend.
From Monevator
Reduce tax on savings by parking cash in gilts [Members] – Monevator
UK and Europe dumps on Trump – Monevator
From the archive-ator: How I got mixed up in this FIRE business – Monevator
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Bank of England cuts rate to 4.75% but hints at fewer to come – BBC
House prices have hit a new record, says Halifax – This Is Money
Mortgage rates to stay higher thanks to Reeves and Trump – iNews
Iceland’s four-day work week seems to be working out – CNN
Foreign buyers eye Japan’s empty houses, but experts warn of risks – CNBC
The ten fastest-growing scams of 2024 – This Is Money
Is Germany’s business model broken? [Search result] – FT
The US market is top-heavy and expensive – Apollo Academy
Trump 2.0 mini-special
People really hate inflation – The Belle Curve
Francis Fukuyama: what Trump unleashed means for America [Search result] – FT
Presidential terms, recessions, and bear markets – A Wealth of Common Sense
Trump 2.0 and the effect on UK investors – FT
VWRL salutes the new king – Simple Living in Somerset
The psychology of America’s divided politics – The Next Big Idea
Breaking down the election results – Slow Boring
Lessons from the post-Civil War era – Politico
Here’s hoping Trump’s VC supporters have his number – Newcomer
Identity politics isn’t working – Noahpinion
Has the US presidency become a dictatorship? [Podcast] – Freakonomics
Products and services
The trend for ‘copycat’ ETF tickers – Bloomberg via Yahoo
Student loan overpayments reach £80m this year. Are you due a refund? – Which
Open an account with low-cost platform InvestEngine via our link and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
Why are university tuition fees going up in England, and who’s affected? – Guardian
“I lost £15,500 to a Revolut bank transfer scam” – Which
Is Amex Platinum’s £400 dining credit card worth a look? – Be Clever With Your Cash
Beautifully renovated homes, in pictures – Guardian
Comment and opinion
Slaying some of the biggest passive investment bogeymen – FT
Big inheritances can be a sign of underspending and poor planning – Morningstar
When did this bull market start? – Of Dollars and Data
Mohamed El-Erian: Budget puts Labour on the right track – Guardian
14 money lessons from 40 years of living – Mr Stingy
The great post-Budget pensions rethink [Search result] – FT
Retire without regrets – Harvard Business Review
The ‘happiness plateau’ doesn’t exist – Bloomberg via Advisor Perspectives
Remember, remember – Klement on Investing
Breaking down the magic of portfolio diversification [Nerdy] – CAIA
Naughty corner: Active antics
Was the Polymarket Trump whale smart or lucky? – FT
Bloated balance sheets in Japan – Verdad
Cash! – The Brooklyn Investor
Headlam isn’t right for a UK dividend portfolio – UK Dividend Stocks
No, higher corporate tax rates do not reduce profits – Klement on Investing
Kindle book bargains
I Will Teach You To Be Rich by Ramit Sethi – £0.99 on Kindle
Eat That Frog! Get More of the Important Things Done by Brian Tracy – £0.99 on Kindle
Growth: A Reckoning by Daniel Susskind – £0.99 on Kindle
A Confederacy of Dunces by John Kennedy Toole [Not financial, just a fav] – £0.99 on Kindle
Environmental factors
UK sales of used EVs hit a record – This Is Money
Many of the big indoor farming startups have shut down – PitchBook
Robot overlord roundup
What AI knows about you – Axios
Writes and write-nots – Paul Graham
AI search could break the web – MIT Technology Review
Off our beat
Read more books – Not Boring
What’s behind Big Tech’s return-to-office mandates? [Podcast] – The Verge
How China is like 19th Century America – Construction Physics
How startups stopped being fun – Crunchbase [h/t Abnormal Returns]
What if America keeps getting better? – Drezner’s World
1,100 emails, a 90% open rate, and why people still ghost you – Nerd Processor
Can Starbucks make a comeback? – The Eater
And finally…
“There is no reason to sell a rising stock.”
– Nicolas Darvas, How I Made $2,000,000 in the Stock Market
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The size of housing in the UK is a real problem. I don’t know of many young people with too much space or too ma y rooms and don’t know of any older people who aren’t rattling around in houses bigger than they need (and don’t get me started on winter fuel allowance).
But I believe the big difference in UK new builds is those that are built for owners occupation and those that are built for investment purposes.
The homes under the hammer phrase “good enough to let out” comes to mind.
Other countries have liveable flats, apartments and the like that the UK just doesn’t do – and new builds are typically on the edge of towns and cities, poorly connected, serviced and reliant on car transportation to get around (not to mention everyone parking on the pavements).
The piece from Francis Fukuyama was good – but whilst history may have ended, the future still scares me.
Very interesting FT article, thanks @TI. New build space standards have been increasing in recent years mostly in response to new planning requirements. These reversing previous trends led partly by the demographics of smaller households and partly by developer returns. Size matters but perhaps as important is quality. Higher mandated standards in many areas (esp. building safety and energy efficiency) obviously represent progress but until our broken planning system and the output quality of some of our major house builders is addressed, not optimistic of progress any time soon.
Following the devastating scenes from Valencia last week, some readers may be interested in the financial risks posed by the climate crisis outlined in this recent Guardian article…
https://www.theguardian.com/business/2024/nov/08/climate-breakdown-will-hit-global-growth-by-a-third-say-central-banks
Anecdotal I know but I attended a gathering of stakeholders centred around new build UK housing recently. Absolutely no-one in the room was optimistic on achieving any of the published targets. None. Too much radical reform in planning processes and pipelines needed and then there is the large uplift in the skills base (largely from increased immigration) to get even close.
The cultural point about measuring “no. bedrooms” over sqm is true although I think that is starting to change. £/sqm figures starting to appear on selling details in places.
In UK we’ve been building the “wrong” sorts of housing for years – room sizes less of an issue IMO. There are simply insufficient 3 bed semis with gardens etc for young families. And in 50 years the word “bungalow” will most likely have disappeared from use so few are built for the aging population to downsize.
On Trump 2.0 – from an investment standpoint it seems there’s a major US sugar rush right now. One wonders if the bond vigilantes start to get busy soon? And I’d be concerned about an aggressive “Schedule F” implementation having all sorts of ripple effects politically in the US. Trump President for Life etc…
5 bedroom houses: an old friend told me recently about a house that’s been bought by a middle-aged childless couple he knows. Master bedroom; guest bedroom; bedroom that serves as a home office; bedroom that serves as a music room; and the bedroom known as the Lego room – where they assemble Lego models and display them to visitors.
Am I grumbling? Nope – it’s their money.
@dearieme
Currently discussing 2nd downsizing with my wife – her wish list is along the lines on:
Option 2 – bungalow with large garden and loft conversion! (Ie a house)
Option 1 – 4 bed detached with larger kitchen breakfast room for 20 bodies (and bi-folding doors) plus snug. And main bedroom, guest bedroom, study, craft room!
I’m not sure it’s going to happen…
Ps maybe we need 2 hobby rooms, some of that LEGO looks cool
Freakonomics podcast getting political. Used to be a good show. Sorry im not a pronoun guy and never will be. Now that Trump is in office keep it about money and finances and leave the political stuff for the news networks.
Perhaps I’m reading it wrong, and I know for sure that I score towards the top of the anal-retentive spectrum, but I think the Apollo Academy’s graph is wrong. The Top 4 Average cannot be 39. I’d believe it if they said it was the Top 40 Average.
@hosimpson
You appear to be correct. The average of 39.0 appears to be that of Apple, Nvidia, Microsoft and Meta. At 25 October, the top 4 included Amazon not Meta (https://www.investopedia.com/best-25-sp500-stocks-8550793) – of course, it may have change in the last two weeks. 🙂
@Boltt Sounds like my wife who said we can downsize as long as it is to a bigger house.
Our four bedrooms are: master bedroom, guest bedroom, my little study, my wife’s Command Module.
Our 4 bedrooms are (upstairs in converted bungalow) master bedroom and bedroom for husband to retreat to to get away from snoring when it’s bad and (downstairs in original bungalow) guest room and gmulti functional room containing books, workout stuff and sofa with fold out bed. There’s also a small study. But damn it I need a craft room! And husband would like a decent workshop.. but really it’s about layout as much if not more than square footage
Re house sizes. Looking at the new builds round here, the profit/ market sweet spot is clearly the fourth bedroom and second bathroom. The room sizes must be tiny.
The morningstar article on underspending in retirement is spot on. Problem is, those of us conservative to have saved for old age tend to have a conservative outlook. The worst may happen. Talking about it doesn’t help: we already know it’s a problem!
@Mr Optimistic (#13):
Agree with you about the Benz (morningstar) post.
Re: “Talking about it doesn’t help: we already know it’s a problem!”
I get that, but do you have any other ideas/suggestions to address the “problem” you would like to share?
Regarding the Morningstar article, I always have a problem with the idea of lifetime giving rather than preserving wealth until it eventually passes as a legacy. In the absence of long-term care insurance in the UK, you never know how much care may cost you. Furthermore, if substantial amounts have been given away, this can be considered as deprivation of assets in any local authority financial assessment.
I’m not saying that retirees shouldn’t help children or grandchildren for specific purposes such as a house deposit, but any wider attempt to pass on wealth during one’s lifetime strikes me as unwise.
DavidV (#15):
Deprivation of assets is an interesting point with potentially significant consequences. However, it cannot be the case that fear of this should entirely stop you from doing what you want to. Age UK recommend legal advise prior to gifting, see:
https://www.ageuk.org.uk/siteassets/documents/factsheets/fs40_deprivation_of_assets_in_social_care_fcs.pdf
@Al Cam (16)
Thanks for the link – an interesting read. Unless my modest charity contributions are counted, it should not be an issue for me.
Re FT piece in the links on slaying passive investment risk – good insofar as the piece goes but doesn’t address at all the main supported critiques (from Mike Green and many others) that, for the largest cap stocks, market makers constrain inventory relative to cap weight to offer the super tight spreads (by reducing the holding cost of inventory) which buyers and sellers expect on the mega caps and, that for the largest firms, this reduces liquidity per unit of market cap weight magnifying the effect of fund flow disproportionately to other stocks. Coupled with the ‘relentless bid’ presently from automatic contributions into passive vehicles (resulting in price insensitive net buy pressure) this results in a non self correcting upwards drift in cap weight index PE etc. Here’s some research from Sammon and Shim of Harvard Business School and Notre Dame University from October 3rd 2024 covering similar but distinct ground:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4777585
They conclude: “firms are the primary sellers of shares when index funds are net buyers, providing shares at a nearly one-for-one rate. Rather than provide liquidity, most demand-side institutions trade in the same direction as index funds, especially over long horizons. To establish causality, we develop a novel instrument for inelastic index fund demand, and show that firms are the most responsive, with prices as the co-ordinating mechanism. We show evidence consistent with stock compensation as the main source of firm issuance to satisfy passive demand, consistent with firms clearing the market for index fund buying but not selling.”