In today’s Exponential Investor…

  • Something fishy in the water
  • Time to sell or buy?
  • To outside-the-box stocks

Something interesting is happening in my local area. It’s very likely it’s happening in your area too.

If you haven’t noticed, go for a little walk within a half mile radius of your home and take a look around.

I went for a walk just this week with the dog around the local streets. We usually take him to the park to let him run free off the leash. But it was late and frankly I didn’t want to go to the (wet) park.

The pavement it was and as we were doing our rounds I had a chance to really notice the neighbourhood. And what I saw was very interesting…

Did I miss the memo?

There were (are) a lot of “For Sale” boards that have popped up around. In fact, after doing a lap of our avenue there were four “For Sale” boards up.

What I find interesting about this is it’s noticeably more than the average number before Covid-19 and the lockdowns kicked off.

I was chatting to a local real estate agent about it and he said he can’t ever recall it being this busy. He said properties are flying off the shelves. Furthermore, he said that it’s not a situation where the properties are flooding the market and no one’s buying either.

Most of the time the properties hit the market and are snaffled up right away. Some don’t even make it to online listings such as Rightmove as they’re sold within days of hitting the market.

Did I miss the neighbourhood watch memo? Has my suburb quickly become the place to leave? I don’t think so. In fact, I know it’s not – it’s just right now the hottest asset isn’t necessarily stocks or bitcoin, but property.

It seems the time to cash in your chips on your biggest, most expensive asset (for most people) is now. But is it the time to sell up? Is this a chance to maximise the value of your house, to downside to upsize? To relocate to a less condensed and populated area?

Is this a short window of opportunity before a capitulation in property prices? Or the start of a mega property boom? In which case, is it time to think about an investment property?

Or is the real opportunity here to avoid the hassles and stresses of being a landlord and to buy into the real estate stocks, the REITs and property investment funds?

Hot prop

The hot property market seems to be reinforced by a recent house price index report from Halifax. As reported by Yahoo Finance,

The average property sold for £245,747 ($325,000) in August, according to a widely-followed house price index released on Monday by lender Halifax.

It marks a 1.6% increase on prices in July and 5.2% rise on a year earlier, the biggest monthly jump since late 2016.

It’s believed a lot of the current property mania is driven by two main factors. First, just the sheer levels of pent-up demand that was building and building during lockdowns. The other being the cuts to stamp duty.

There’s also likely a third factor in play, and that’s a shift away from major metropolitan areas to widen the urban sprawl. I’ve anecdotally heard of people desiring to sell up and move further “out” for the slower pace of non-city living.

Statistically, we don’t know if that’s the case yet. However, we will know likely by Christmas as we start to see what the economy does without the lifejacket from the government.

I’m expecting a spike in unemployment in November that might just put extra strain on the housing market.

Don’t forget the furlough scheme is still ticking along, and that’s going to end on 31 October. What happens when people can’t furlough any more and when employers can’t afford to keep them on the books?

What happens when double-income households wind back to single-income households? Or what happens when renters can’t afford the rents they’re used to? This all puts strain on homeowners, landlords, everyone.

Once this initial pent-up demand falls away, and there’s a market awash with places for sale but no one to buy, that’s when things really sort themselves out. That’s when the real impact of the last six months hits the British household.

If that’s the case, then it would indicate this is a small window of opportunity to cash in on a cushy hot property market.

While the residential property market might be sailing into danger territory, there’s one segment of the market which might stay white hot. But to see its potential, you’ve got to look a little outside-the-box.

Two storage stocks worth a look

Take a look at the storage property stocks.

Safestore Holdings (LSE:SAFE) is the biggest operator of self-storage facilities in the UK. With a market cap of £1.6 billion this is a dividend paying stock that took a hiding in March with the rest of the market and has since bounced over 50% from those lows.

It’s the kind of property stock that when you think about property investment you should be really thinking about. And considering it’s still short of its February highs, there might be some capital upside there as well as dividends long term to sink your teeth into.

Big Yellow Group (LSE:BYG) is another storage company worth a look at – dividend paying, solid, sound business model, hammered in March, bounced back but short of the highs from February. Possible capital upside and ongoing dividends.

These are the kinds of property investments that you need to look at exposure to if residential property does take a nosedive. Even when property is hot, self-storage continues to keep on keeping on.

If you’re going to look to property in your portfolio, the smart move might just be to avoid the more traditional property ideas and think a little outside-the-box – at the storage box.


Sam Volkering
Editor, Exponential Investor

Category: Commodities

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