Category: London life

My 20 year property returns

FIRE v London8 Comments

I was pleased to have reached the 10 year point of tracking my investment portfolio last month.

But my net worth includes an important asset class – property – that I don’t normally track, but which I have held in some form for over 20 years.

So, this post takes a look at how my property assets have performed.

Property works completely differently, for me, than my investment portfolio. For starters, I have never bought a home as an investment. But let’s start at the beginning.

My property owning history

I nearly got on the property ladder in the mid 1990s.

I hadn’t realised, until a friend pointed it out a few years too late for me, that in fact one of the easiest times to get on the property ladder was the moment when I graduated and moved to London. My first job earnt a reasonable London salary of just over £20k, and 1 bed flats in a reasonable part of Zone 1 in London were available for under £70k (now £800k-£1m, sigh).

Mortgage rates had dropped from >13% in 1990 to around 7%. The interest costs could have been around £5k, a quarter of my first-job income. That was in the mid 1990s. It didn’t occur to me to buy a place, and of course those property prices were so high…..

By the late 1990s, buying a property had become a lot harder. But once I was earning £40k+ I decided to take the plunge. I found a reasonable 2 bed place very close to Zone 1 for £200k (now £500k). The mortgage (at around 7% interest, i.e. interest costs were £13k, a third of my gross income) and the deposit (£20k, if I remember rightly, for a 90% mortgage) were a massive stretch….. and then I was gazumped. By the time I reorganised, the places I wanted cost £220k+ and I couldn’t quite afford it.

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Eye-watering energy costs

FIRE v London34 Comments

The UK in the energy vanguard

Here in the UK, many have taken pride in our enlightened energy policies.

We led the world, under Mrs Thatcher in the 1980s, with privatising state utilities – so our gas, electricity, telecoms etc are all in the hands of private companies. Guarding against the natural tendency to monopolies in such sectors are our industry-specific regulators OFCOM and OFGEM.

More recently (though following an initial lead from Mrs Thatcher), we have been one of the leaders in moving to renewable, ‘green’ energy. In 2019 renewable sources exceeded fossil fuel sources for the first time. Not long ago our media was proudly boasting how we had managed to power the country for two months without using any coal.

UK Energy consumption by source, 1965-2020

Not for us the Japanese/German greenery-gone-amok policies of turning off nuclear power mid life. Not for us the hypocritical and myopic German policies of reliance on brown coal and Russian monopoly gas. And not for us using fracking to unleash new reserves under our precious, fragile, green and pleasant land; we’d rather let the Americans do this in their flyover states and then pay them, now a net energy exporter themselves, a premium to liquify it and send it over to us. Who wouldn’t?

And to top it all, the UK has been one of the fastest markets to adopt Electric Vehicles (EVs), hastened by a variety of subsidies and tax incentives. EVs pay lower car taxes, lower congestion taxes, lower parking fees, and could be purchased with the help of several thousand pounds of subsidy. Over half of new car enquiries are for EVs, and over 20% of new registrations are for pure or hybrid EVs.

Being in the vanguard in 2019

The results of these enlightened energy strategies have seen our CO2 emissions fall faster than most OECD countries. We were paying, until recently, only a modest premium for our greenification. Consumers have had a choice of over 70 companies, and many hundreds of tariffs – allowing such innovations as Electric Vehicle-specific tariffs, empty-property-specific tariffs and tariffs accumulating loyalty points. And our privatised, competitive model has been ‘improved’ with a Labour Tory retail price cap, restraining operators from milking the can’t-be-bothered-to-shop-around segment.

The chart below shows what this felt like chez FirevLondon back in 2019. Those halcyon days when I worked away from home five days each week, drove a petrol car, and lived in one house – admittedly my Dream Home. The Dream Home consumed around 46k kWh of energy each year – admittedly far more than an average (smaller) UK household – yet cost me less than £250pcm of energy. My car usage was far less than an average household, so the fuel for that cost me only around £1k per year – ensuring I could drive a large-engined funmobile ‘cheaply’ (25p/mile doesn’t add up to much if you don’t drive many miles!). My total fuel costs amounted to less than £4k per year. Of that, the taxman received around £840 p.a. of tax and fuel duties – chiefly from my petrol car. Energy is taxed at a reduced rate of Value Added Tax (VAT) of 5%, compared to 20% for normal expenditure.

Energy costs p.a. in 2019

How times change

Now, unfortunately, in 2022 it turns out that the world looks completely different.

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June 2022 – drawdown breach!

FIRE v London5 Comments

June was gloomy.

Not in London, which is lively, crowded even – and a delight to see. Pavements are busy, restaurants are proving tricky to get bookings in, the river is heaving. I even managed to get to ‘the beach’:

Sand, tides, sunshine – locally in London

I managed to spend a bit of time down around the Coastal Folly too. I’m still finding my rhythm having two homes but so far it is going pretty well. A London kitchen project is running late / badly which gives us plenty of excuses to be down by the coast.

Sandbanks, tides, sunshine – down by the coast

The UK saw a week disrupted by rail strikes but with Working From Home now an option and so many cycle/etc options it didn’t feel too disruptive for me. It was interesting though how positively the union leader Mick Lynch came across in the media and I think if we do find ourselves in a year of employee-driven strikes he will deserve the credit/blame for it. The RMT appears to be asking for about 9% pay increases for train workers. Drivers are coming up next, apparently, along with GPs (asking for 30%!). We are rapidly getting away from ‘inflation is just spiking up temporarily’ to ‘well, if they’re getting it, then I want it’ and that could take years – and a much more competent government – to shake out.

And it is this inflation gloom which is suddenly pervasive. Not just in the UK, though the UK does appear to be taking a particular bruising. Markets got hammered in June and, lest anybody forgets, they hadn’t had a good run of things earlier in the year either.

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