1. Capital Gains tax update
The Robbing of Private Property Investors: Property investors are being attacked like the bankers – however, property investors are the ones paying 6.0% on mortgages to help bail out the banks – when interest rates are only 0.5% (a massive 5.5% uplift premium, unprecedented in history), meanwhile providing a public service by supplying rental accommodation – often at a cashflow loss – often to people on housing benefit and the unemployed. This attack on hard working individuals and families is crazy – property investors take all the risk, and get hardly any of the reward. It’s not the buy-to-let investors that have been defaulting on mortgages. Property investors did not cause the banking crisis.
Private investors are now helping pay for bank bail-outs through over-inflated mortgage costs. Council taxes. Energy costs. Regulations. And they don’t deserve either 40% or 50% capital gains tax out of the blue – looks like robbery.
It was only two years ago that long term property investors were zapped with a 18% flat capital gains tax with no tapered relief – this meant an effective 8% increase in tax for someone selling a property after 7 years. The result was more tax on inflation. And higher taxes for the long term hard working property investor – that risked their after tax cash for a decade during uncertain times. Hard speculation – instead providing a service and long term investment in the country.
Property investors get the worst of all worlds – they are not considered entrepreneurs, they are not considered businesses, and they are bundled in with second home owners – but meanwhile they provide a public service to tenants 365 days a year - whilst on call 24/7. Many landlords have had enough and are starting to sell up – who can blame them. The costs are too high, costs have sky-rocketed of late, taxes are too high and returns nearly non-existent – and just about to get a whole lot worse. Many investors have massive losses on their books. If the government decide to penalize buy-to-let investors in this way – it will surely lead to tears all around. It’s difficult to see frankly anyone that would gain. Government, landlords, tenants, home-owners – we honestly believe by April 2011 all will have lost out if these draconian tax measures come into force. It’s also a well know fact that increasing CGT leads to reduced take revenues – for every 1% they are increase, revenues drop by 2% - see this article by a respected think tank.
Crisis Triggered by Tax Change: So just in case the government starts the crisis on 22 June 2010 – feel particularly sorry for the tenants – many would be given notice at the same time and would be un able to find a place to live by end 2010 if these tax changes take effect – lots of empty properties being sold with too few buyers. And rising rental prices. The average home owner would also suffer as property prices came down – and negative equity and lack of mobility could then start effecting bank's liquidity – bad loans all over again. All a sorry story from a tax gain that would likely lose revenue for the government in the next few years – in fact, after the damage done particularly to the banking sector, it could cause massive losses.
Warning - No Tapered relief = House Price Crash: The only hope is that - if the government do foolishly decide to target buy-to-let investors, that they provide tapered relief, for long term investors. Property investors are not day traders – they invest for the long term in communities, and providing a social service. If there is no substantive tapered relief (like the system prior to 2006) and the government give people until April 5 2011 to sell off - there will be an almighty bail-out that will lead to a house price crash - this is what we think. Second home owners would run for the hills. Country areas would suffer huge falls. Funnily enough these are just the areas that the Conservatives and Liberals have the largest share of the votes - they would be causing a crisis in their heartlands. It's not just an idle thought - we are serious. Why wouldn't it set in a panic selling situation?
High Tax Britain: The only other consideration is - whether it is worth emigrating to a low tax country. High tax forces people out. Many European countries like Slovakia have flat tax at 20% or less. Countless studies have proved overall government tax take in the medium to longer term is highest with GCT at 10% to18% tax – so why change it? It’s regressive, backward and defies economic logic and objective academic economic studies. Others like Switzerland have tax of around £25,000 fixed a year based on the size of a rental property you live in. The overall tax rate of high earners is now about 80+% when you take into account earned income tax (50%), bonus tax (50%), capital gains tax (could be 40% or 50%), inheritance tax, national insurance (11%), council tax, VAT (20% soon) and petrol/other duties (80+%). Britain just taxed itself to death. So if you are really upset about it - it's seriously worth considering moving out of high tax UK. Or at least doing some calculations to see how much of a benefit it could be depending on your business and personal circumstances. When you add up the tax on tax on tax – it’s well over 80% - especially if you send your kids to public school (no tax offset) and are a high earner.
Impact of Tax Changes on Housing Crisis: The new government desperately needs to encourage home building and increasing flows of property for private rental - but so far we have seen no evidence that this will be the case. In fact, all the evidence so far points to further shortages - albeit there could be a short flood of properties on the market later this year if the capital gains tax change: 1) starts 6 April 2011 (instead of immediately); coupled with 2) zero tapered tax relief for buy-to-let properties. If this happens, it would be the single most catastrophic event to hit housing in twenty years - and it may be many years before things recovered to normality - meanwhile buy-to-let investors would have lost all confidence in the market and their investments. Rents would have sky-rocketed and there would be many empty properties as no financing was available to sweep them up. We know it would happen - it's just the honest economic and market logic. To think someone who invests in a property and providing a service to tenants for a 10 to 20 year time frame during inflationary times - should pay the same 40% or 50% tax as a day trading speculator - is outrageous, absurd, stupid and ignorant. Everything we would never expect from a Tory administration. How can they do this? Who do they think we are? The Tories never mentioned this in their manifesto a few weeks ago. Voters voted from them only six weeks ago. 36% Tory plus 22% Liberal Democrats (plus the 24% Labour) never voted for this absurd tax change that would lead to lower revenue we all know. If it happens, it's time to bail out from investing - why should people take 100% of the risk but only get 50% of the reward over a ten year time frame when inflation has risen by 50%? That tax on inflation after ou have already pay 80% tax – that’s more like 90% tax after ten years – it’s absurd.
Tax on Tax on Tax on Inflation – a 90% tax: We would like to remind Vince Cable - the Business Secretary and Lib-Dem architect behind the CGT increases - that for buy-to-let investors, taxing on capital gains at the same rate as earned income tax is ludicrous. The reason is that almost all buy-to-let investors already pay earned income tax at rates between 20%, to 40% and even 50%. They use any remaining disposable income to save, then invest. So if after ten years of inflation, there is then a further 40% or 50% capital gains tax on any non-inflation adjusted asset increase - it's then equivalent to more like a 90% tax. It’s taxing inflation! On top of this, buy-to-let investors have to pay council tax, VAT, petrol tax at 70% and other taxes. So it is crazy. And we are surprised it's ever got off the ground for serious consideration, because economically it makes no sense. We plead and kindly request that Vince Cable (as an ex-economist) checks his economics notes or does a net present value cashflow - and you will then be able to see what we are talking about. Flat 40% to 50% tax rate is something draconian that a far left leaning socialist government in another country would implement. Not a progressive Conservative and Lib-Dem coalition. We did not vote for this six weeks ago. It’s crazy - period.
Buy-To-Let Investors Are Bailing Everyone Out: What's particularly concerning is that buy-to-let investors are now paying 6.0% mortgage payments to balance the books of failed banks - and helping the government get their bail-out money back. And when the bankers make profits from the 1 million buy-to-let mortgages - they pay themselves massive bonuses. Yes, that's a gigantic 5.5% above the base rate of 0.5% - a massive tax in effect on buy-to-let investors of 4.5% per annum on finance over and above the normal 1% uplift. So on a £100,000 mortgage, that's £4,500 a year. Meanwhile inflation runs at 3% over the long period - say ten years. So these hard working investors risk their money for a ten year period and pay this massive uplift tax on financing - and note very few buy-to-let investors have defaulted. Meanwhile we risk tenants not paying, fire, leaks, tenants trashing the place, services charges, council tax, higher energy costs etc - and all the 24/7 hassle of being an unglamorous landlord. And now the coalition is proposing to take at a stroke up 40% to 50% of this inflationary asset increase after ten years. It's totally unfair. It's a joke. It defies economic logic. It's the highest capital gains tax in the western world. It will lead to a house price crash. On the non inflation part of this increase over a ten year period, the effective tax would be 75%! But after considering most investor use cash after income tax to invest in property, then this inflates as they pay high interest rates – the effective tax on the non inflationary element is more like 90 or more%.
No Tapered Relief and Tax Increase Would be Disastrous for all: Also, for property investors, if no large tapered relief is available on any capital gains tax increase – then it’s seriously worth considering selling up if you don’t think it will be reversed quickly. If you think "big fat flat tax" will stay, why should anyone use savings made after paying earned income tax at rates of 40% to 50% to then invest in property, that is then taxed again at 40% or 50% after ten years even though inflation may have been a compounded 50% (4% a year). That’s an equivalent tax rate of 90%! Or 100% on non-inflationary capital gains. Yes – we are serious – why would anyone invest or risk a 100% downside for only a 10% or less upside? It's economically stupid. Property investors pay 5.5% a year on the full borrowing over and above the base rate. Why risk 100% of your cash every year, for an after inflation capital gain of 1% a year – if property prices are lucky enough to rise? Meanwhile paying 5.5% mortgages to banks when the base rate is 0.5%. You’d be bailing out the banks for ten years, risking 100% of your cash, and getting no return after inflation – absurd. If flat 40% tax comes in to force, it’s simply time to get out quickly for long term investors. Yes – we are serious. All will be revealed on 22 June. We just hope the government don’t pull this trigger. Frankly, the more we analyze this potential tax, the more convinced we are that the only route leads to fast divestment – if it’s implemented.
90% to 100% Tax No Thanks: Is it fair that there is a potential 90% tax on long term buy-to-let investment? It’s the most ridiculous taxation idea we have ever seen anywhere in the world. And if house prices crash by 40%, most investor lose everything - having paid the massive mortgage fees and taken accumulated losses over the years - with no tax benefit or break from this (they cannot be offset against wage earnings). We still encourage everyone would is worried to sign-up to the Telegraph petition on capital gains tax. If you don't like the outcome on 22 June, there is also no point voting Tory or Lib Dem in the next election.
Instability and Shortage: Overall - whilst there is a massive shortage of good quality accommodation for rental and purchase, there is also a big chance tax policy decisions could destabilise the market and regrettably make matters a whole lot worse. The way out of the mess is to:
· give tapered relief on capital gains tax (down to zero or 10% rate after 5 years) for buy-to-let investors (and other investors for that matter)
· don't shoot the market in the foot by having a blanket 40% or 50% as of 5th April 2011 - this would lead to a house price crash for sure - everyone would loose out and it could lead to banking meltdown
· start encouraging investment in the building of houses, in southern England especially
Brain Drain: Remember, anyone trying to improve their asset position is only doing this so they do not have to rely on government pensions one day. This after previous government destroyed pensions. This wealth creation benefits the country. It is a very dangerous policy one that stifles risk taking, business behaviours and entrepreneurialism - all this top talent will leave the country if they are treated in such a poor way. Other European countries have far lower taxes - so if we want to go back to the 1970s - we'll get a big brain drain of the most motivated and talented individual voting with their feet. Then the country will be in a permanent recession. Everyone will lose out. And all voters will be disappointed. We plead to the government – don’t do this – its madness.
2. Reflections on USA and US real estate investment
Our team haven’t written on US real estate investing for some time, indeed since the new administration took charge. We’ve been monitoring things at a distance – to stay objective – and pausing until it becomes clear what will happen. The team has now made up its mind.
Problem Administration: In summary, the current administration after 17 months is socialist, inward looking and nationalist inclined - and is intent on increasing the size and influence of government, with higher taxes, a larger public sector, larger debt, increasing interference in business – and is not particularly business-friendly – is it often short-sighted with regard to energy policy and energy self-sufficiency.
Two key issues are not being tackled in our view:
1) Dependency on imported oil (costs $1500 per person per year and increasing)
2) Escalating healthcare costs (costs $6500 per person per year and increasing)
The finger pointing blame game often played – on banks and now oil companies - shows anti-business tendencies from leadership of the US administration. We have not seen a US administration anything like this one before. After17 months this is the tip of the iceberg and the pressure is set to increase. It will begin adversely affecting the economy shortly – someone has to pay for the public sector and debt payments – it all has to come from business and individual taxes, and the smart have started divesting and the wealthy are starting to exit – either to international markets or retiring before the next meltdown. This is demonstrated from the Dow Jones performance – the Dow dropping has been despite the massive profits being made with record low interest rates, a debt fuelled windfall spending blitz and tax breaks.
End of Tax Breaks: The tax breaks to stimulate the US economy given by the previous Bush administration are ending in 2010. Because of these tax breaks in 2009 and 2010, companies have been making healthy profits – and declaring profits before the tax hikes in 2011. Efficiency has not improved – these are mirage profits. Companies are paying themselves and shareholders huge dividends to try and get the money off the balance sheets before the swinging high taxes come into force in 2011. If you think the budget deficit is bad in 2010 with all these tax revenues rolling in, just wait until 2011 when tax revenues and incomes dry up with the new tax increases and higher unemployment, with higher public sector spending and aging population healthcare provision. The deficit will get worse and with it borrowing costs are likely to rise, the dollar will fall further and there is a significant chance of a double dip recession – or at best stagnation in growth for some time as from about October 2010.
What Benefit Did $1.8 Trillion Do? As the dollar drops, the pressure on inflation is likely to increase – this could lead to interest rates rising just as taxes increase and growth slows. $1.8 Trillion of stimulation has helped the country grow its economy from -2% to about +3% this year – that’s an increase in GDP worth about $0.4 Trillion – a very poor return on this spending (or investment as the government calls it). Would you invest $1.8 Trillion for a $0.4 Trillion return? The US economy on the face of it appears to be coming out of recession with the GDP fairly healthy at 3%. But it’s hardly surprising when interest rates are more or less zero %, printed money of $1.8 Trillion has been used up and as an example 400,000 jobs were created for a 3 month period just to perform a country census – that’s a lot of people not doing very much. There is a feeling that the USA will try and inflate its way out of the debt trap – but this is a very dangerous game. Especially when everyone else is at the same game.
Business Beating: What’s rather disturbing is how the very best entrepreneurial companies like Google, Facebook, Apple and Goldman Sach have been under attack from certain anti-business people. USA used to pride itself on its business and dynamic economy – now some of the best people are hiding away. And innovation is being stifled. The USA should be incredibly proud of all these leading companies –they are massive global leaders. China now leads in renewable energy for example – they are building solar panels, wind turbines and nuclear power plants like there is no tomorrow. Also electric cars and normal cars. They now produce more cars than the USA. Meanwhile the US car firms were bailed out at huge cost with promises of change, but they are still making the old gasoline guzzlers – nothing has actually changed.
Increasing Oil Production Set for Decline: Last year, after years of stimulation and encourage by the previous administration, USA finally reversed its production decline with an increase of +7% in indigenous production, mainly from the Gulf of Mexico and North Dakota. But expect a rapid reversal next year and increasing oil imports as the ban on offshore drilling and slowdown generally starts immediately to affect oil production. This is likely to coincide with a global production decline or at the most optimistic – stagnation. Meanwhile India and China’s oil demand rises by 10% per annum. The numbers don’t stack up. It means oil prices will rise to kill demand – and with it, global and US GDP will suffer. The USA’s reliance on imported oil is a huge country risk - $400 Billion of oil imports a year –and nothing is being done about it. It is likely to get a lot worse next year and the following year and investments are cancelled and regulation is increased.
International Investors Positive: The good news is that international investors still have not lost faith in the US economy and investment. They see the dollar’s decline as an opportunity to buy cheap assets and what they currently believe to be knock down prices. But we thing despite the healthy population increases, in 2011 the US economy will stagnate again and unemployment will continue to rise as money runs out for public sector jobs, private sector is squeezed further and financial markets put pressure on the security of US debt – particularly as oil prices rise. We wish we could be more positive but we thing with the current administration – things are going in the wrong direction and it is not prudent to either view the US as any kind of safe haven or expect a long term growth to be again sustainable. Rather than growing production in 2009, by 2011 – oil production will again be declining fast, as ten years of encouragement has been reversed.
Flaws: A key flaw in the US economy is it’s gigantic use of a depleting oil supplies. The good news is there is a chance to switch to gas, along with coal-electric. But progress is so slow, our team cannot see this happening for many years. There is a crisis, but no-one has noticed. And by the time they do, it will be five years too late. The current administration is in denial the Peak Oil exists – despite their only oil production declining since 1970 and the world’s oil production not rising for five years (peak oil discovery for USA was 1930 and the world was 1970 – so 40 years later, one would expect the same to happen to the world oil production – in fact, it seemed to happen 35 years later.
Longer term: Because of USA’s huge gas and coal reserves, plus other resources and technology-innovation and infra-structure, things could improve, but what the USA urgently needs is a business friendly government that wants to tackle the deficit and reduce taxes, and stimulate indigenous energy supply. But instead, they have a business unfriendly government that does not want to tackle the deficit and wants to increase taxes. Sorry – bad combination. We hope we are wrong because we love the USA, we have spent many years living there. But for property investors, don’t expect a big improvement in 2011. And if you are pondering taking the plunge, expect a declining dollar, stagnant GDP in 2011 and pressure on house prices.
3. How we messed up - perspectives for Western European
We Messed Up: The simple truth is that we’ve all collectively messed up the planet in the last fifty years. There is no use denying it. The legacy for our children will be a tough one. The reasons are:
· The global population has doubled in this time - from 4.2 billion to 9.5 billion people
· The rainforests have halved
· Peak Oil is now behind us – it happened in July 2008 for all liquids and 2005 for crude oil – oil is on a bumpy plateau and will start an irreversible decline shortly
· Temperatures are warming and water shortages loom - ice caps melting, biodiversity crashing
It's no one person's fault. It's the global system that has been created that has been incapable of putting measures in place to prevent deforestation, massively increasing populations in some of the poorest areas whilst ignoring energy conservation, denying we have already reached Peak Oil, and assuming everything will be fine in the future. Very hard questions - how do you reduce deforestation, forest burning, gas guzzling cars and inefficient use of resources. No government seems to have made any real progress - and we muddle into a crisis situation almost by stealth. All eyes are currently on a live video feed of an oil leak 1000m below the sea in the Gulf of Mexico (and we saw a bird covered in oil today for the first time). Meanwhile forests continue to be cut down, animals driven out, oil supply shortages loom, no action is being take on looming food shortages and the population explosion.
It’s Too Late: No amount of technology can help most of these issues – it’s rather too late for that. We are about ten years too late for Peak Oil, 25 years too late for Climate Change, 40 years too late for deforestation and 50 years too late for population control. (for links to charities that can help, please click on this link and go to the bottom of the article)
Looming Crisis: Meanwhile the population continues to increase at a dramatic pace. Energy shortages loom. No concerted efforts are being made to switch to renewable energy and electric transportation. In any case, electricity adds to the carbon footprint – sometimes even more than petrol power if coal is used to generate electricity. There is almost nothing being done globally on the deforestation issue. Biodiversity is decreasing and fish stocks are collapsing in many areas. The ice caps have started melting – with no end in sight. Sea levels are rising. Madagascar in 1960 was pristine forest. It’s almost completely denuded of forest now – check GoogleEarth. The Amazon rainforest is half the size now compared with in 1960. Deforestation is probably the single biggest mess we have seen on this planet. Inefficient use of oil could be the second. USA for examples has 5% of the population and uses 25% of the world oil - meanwhile importing 15% of world oil production. It's not sustainable.
Rainforests Disappear: Rainforests in 1960 covered 14% of the worlds area. They are now down to 6%. In 40 years, NGOs think they will be consumed - yes, no remaining rainforests. That's a crisis - and because rainforests cool the environment, prevent soil erosion, pump out O2 and consume CO2, they help reduce global warming. They anchor carbon. Most rainforests are burnt to provide grazing land for beef, sometimes to grow arable crops, sugar cane - and sometimes just to build homes, often not even to be farmed. It's a depressing state of affairs. In Madagascar, the country was all tropical rainforest in 1965 - now it’s a hot desert with soil erosion in most of the country. Rainforests have been plundered. Half of rainforests have disappeared since 1965. The rest are likely to disappear in the next 40 years - according to experts.
Problems To Big for Individuals: It’s all rather distressing. As an individual you cannot fix these problems – we can all try and help, but the human nature and behaviour of being one person in 9 billion is not conducive to solving the world’s problems. Even if you were President, it would be very tough to make a big difference – it’s more the case of mitigating against problems on the horizon. But we see little evidence of this. The extent of the issues seem to be ignored. We have to try and get local, stay local and position ourselves and our immediate family and friends for the bumpy ride ahead.
Good News on Security: The good news is that – despite all the bad aspects – much of which is amplified in the media – the world is more peaceful than it ever has been. Fewer people are killed in wars than at any time in the last 100 years. Terrorism has dropped. Iraq and the Middle East is far more peaceful. Travel and tourism make world travel and adventure possible – albeit at the cost to the environment. And we have lived through an unprecedented period of global economic growth in the western world off the back of cheap easy oil. This is just getting started now in China and India – they are 40-50 years behind the USA in their development but they will rapidly catch up. They will need huge supplies of commodities to build cities and fleets of cars and trucks. Demand for commodities will increase along with this growth and the global population growth.
Good News On Food: The other good news is that starvation compared to years ago has almost been eradicated – if the UN, EU and USA find people starving, they fly in food and make food drops. This can happen within days. This is the benefit of cheap oil, airline technology and the massive wealth this has created. But what happens when aviation fuel shortages start. Government hoard fuel. Then if people starve, it could be a different story. Social unrest cannot be quelled as easily if security and humanitarian forces cannot get access because of fuel shortages. This is one of the key concerns with the five key issues of population increase, water shortages, food shortages, Peak Oil and climate change. The amount of social unrest and people starving could increase – and regrettably governments might have enough on their plate with their own Peak Oil challenges (fuel and food shortages and debt) to be able to offer the same help as they do now, in the future.
UK Challenges: For UK citizens, we expect the next ten years to shape up to be challenging – far more challenging for most people than they think. The need to reduce debt is serious and severe – because we’ll need the money to change infra-structure to cope with Peak Oil and the end of global food and goods shipments – and to develop local manufacturing supply chain systems again. The key reasons for the challenges are:
· Population increase – the UK’s population will rise from 60 to 70 million by 2030 – the seeds of this rise have been sown in the last 13 years as immigration has increased and the size of families has increased. The UK will be the largest European country by population in 2030 (bigger than Germany).
· Climate Change – if you believe the scientific experts in this field, it’s most likely the UK temperatures will rise on average by 2 to 5 deg C between now and the end of the century. Temperatures in London used to be very infrequently above 25 deg C – by 2050 – in the summer, it’s likely to be commonly in the maximum 28 to 32 deg region. Winters will be wetter. Winds will be stronger. Summers will be drier and hotter. The south coast will have vineyards. Overall – the weather is likely to improve. Less cold winters, warmer summers. More sun in the summer. But bigger storms.
· London will continue to grow – another million people in the next ten years. Where they will live will become a pressing issue because only 20,000 new homes are being built in the region at present – so property prices will continue to drift higher and rental prices will rise sharply. Not enough buy-to-let investors to feed the market. Almost no social housing will be built.
· Peak Oil Effects: The effects of Peak Oil will start to be felt in a few years time. By 2015 there are likely to be pretty severe shortages. The good news is – by then – the UK will at least still be producing half of its oil needs. Energy conservation will become a key theme for governments. Periods of power shortages will start to be noticed as under development of the electricity grid and power units starts to show the strains. Nuclear power stations will be decommissioned and very few new plants will replace them. Wind energy will expand, but not nearly enough to offset closing low efficiency coal burning and nuclear power plants. LNG imports from Qatar and piped gas from Norway and Russia will become key energy supplies for the UK for gas to power plants that will expand to make up the shortfall. Because of diverse LNG supplies, gas security of supply could actually improve to offset the threat of Russia diverting flows in eastern Europe.
· Water: The good news is, the UK has plenty of water. It also has some very fertile farmland – plenty enough to feed the population as long as it receives enough fertiliser (phosphorous etc)
Projects Cancelled – Too Expensive: Large infra-structure projects will be deferred and cancelled – the reason being – they are too expensive. Yes, with oil prices well over $100/bbl – the UK will not be able to afford these. The benefits will also be challenged. The old road and rail networks will need to take the strain of an ever increasing population. People will work from home more, start travelling less – and lifestyles might actually improve as people use technology more and spend less time in traffic jams ferrying people around or going on aimless trips. Petrol prices and taxes will rise to try and drive people off the roads. Toll roads will become more common. Travelling by plane will become far more expensive as airlines are tax (fuel duties start). The government will wake up to the fact that petrol taxes are 80% for Joe Public whilst airline fuel taxes are zero for the much travelled bigger carbon printers.
Airline Travel for Rich: As oil prices rise, airline travel will drop as will sea transport of goods. More products will be produced locally and regionally using trains and short haul barges for transport thereby saving fuel. More marginal land in the UK will be converted to productive agricultural land. There will be more market gardens, less beef and more arable and vegetables and fruits grown locally. For the property investor, land will be a good investment – especially marginal low priced land and scrub that can be converted to productive farmland. The days of airlines transporting strawberries and apples from South Africa and South America will be over. Produce will be more seasonal as it was in the 1950s.
Lifestyle Improvements: The bad news is – we’ve really messed up the planet. The good news is that in the UK, lifestyles might actually improve. Despite the population increase, it might be less noticeable because people will be travelling less. Yes, when people travel – it will be more overcrowded and still creaking, but the use of the internet, telephones, video-conferencing via iPads, PCs and iPhones will cut the need for a lot of travel. Companies will get used to people being in the office only 3 days a week. Companies and the public sector will encourage people to cycle. Car parking in cities will be at a premium – get even more expensive.
BRIC: India will boom. China will boom. Brazil will boom. Russia will boom. USA will struggle with the weight of debt with healthcare costs ($6500 per person per year) and oil import costs ($1500 to $3000 per person per year).
PIGS: The PIGS countries – Portugal, Italy, Greece and Spain will suffer from:
· Declining populations
· Aging populations
· Low efficiency manufacturing decline
· Global warming – temperatures rising to 40 deg C in mid summer
· Water and power shortages
· Massive unsustainable oil, gas, coal, energy and metals import bills
· Decline in tourism and airline travel
· Fertiliser shortages – strains on agricultural productivity and high cost of imports
They will have to exit the Euro to devalue their currencies and start setting interest rates to match their economic efficiency and growth.
Cool North: Cooler northern European countries should fare better as temperatures rise, water shortages are far less severe and populations stay more stable.
Norway The Coolest Place to Be: Norway will be the real winner because of its foresight in developing renewable energy even though it has the largest oil and gas exports per person by far in Europe. Hydro-electric schemes. Wind. Tide. Biomass. They will all help maximise oil exports and gas exports and minimise and conserve indigenous oil and gas supplies. Meanwhile the small but expanding population of 5 million will be flush with cash. The sovereign wealth fund will become gigantic in value. Property prices will continue to rise. Water shortages will be non-existent. Corruption will remain almost non-existent. Security and safety will remain high. The country will stay protected from debt, contagion, global warming, water and food shortages – the affects of Peak Oil will be positive to their balance sheets. Norway is the next Switzerland.
If you are seriously concerned about the state of the Euro and UK economies and rising tax burdens, Norway is an interesting opportunity. If you are serious - then you need to learn the language - and be prepared for cold winters, introvert population (takes a long time to break into social networks) and high tax on alcohol. If you like skiing, are introvert yourself, and want to quietly generate wealth - its probably the best place in Europe long term.
Framing An Opportunity: We hope this article has helped frame some property investment opportunities for you – high level in the future. The key message is – don’t get caught out by Peak Oil, debt contagion and the ravages of weather, water and foot supply – in a European context. We will do articles in future on the outlook for other continents – Africa for example with its challenges. But for now, we hope Western Europe has stimulated some thoughts on property and land investments – protected from the key challenges facing the world in the next twenty years
source: pinvest
