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As I mentioned in earlier blogs the average property market is made up from several different types of property, and the buyers have differing aims. All this will affect the various types of property differently. Let's start with commercial property.

The lockdowns of the past year have seriously affected office space. Let's have a look at the maths, which is where it really counts.

To run a business from an office block both costs and ties up rather a lot of capital. There is the cost of buying the block in the first place, or the cost of renting. Then there are the running costs: rates, heating, cleaners, plus ancillary items such as running a cafe, first aid, etc. Then there are the costs of the staff, from wages to pension schemes and insurance.

Starting off a business with a large capital outlay is not the ideal way forward. Doing without an office block saves that initial outlay, or it removes the need for ongoing rental expenses. Making the majority of staff work from home saves on insurance and ancillaries. Staff can be monitored to make sure they are working by using appropriate software, which is currently available.

There are other benefits. The staff dont have to waste time on public transport getting to and from the office. That also saves money on the travel costs. The office camaraderie is lost, but I dont know how to assign a value to that. It is also the case that we aren't suddenly going to see people working from home. This is a move that will happen gradually. But it will start to affect the price of the average office block. Who needs to buy or keep renting one if home working can be managed?

This trend will lead to a slide in commercial valuations. The answer here is obvious. Dont invest in office space. It's going out of fashion. The more automated things can be, the less staff is needed anyway.

That leaves us with an important question. What happens to the office block?

Glad you asked. Blocks of offices have been converted into flats for sometime already. That move will be continued and extended. This will help to provide more accommodation for families.

Conclusion:
Dont buy into office space until it is empty and a company seeking funding is prepared to take it over and convert to residential. But always check both the company and the maths. That's one for the investment crowd, or those seeking a steady pension income.

What about residential property? Are we heading for a crash as so many pretend-experts claim?

The evidence at the moment would appear to be contradictory. The real downer is what conclusions lenders will draw from the lockdown experience. Moratoria on rents and mortgage payments don't do the lending or investment side of the business any good.

There is also the question of the gradual extension of the use of robots and more AI driven automation. Robots dont need wages or sick pay, maternity leave, or paid holidays, and the average robots can work 23 hours a day. Also, robots are getting cheaper while wages keep rising. It's a no brainer. I foresee swathes of office workers out of work in the near future. The same is going to happen to truck drivers once driverless trucks become mainstream. With the tech side of driverless cars already on version 4, and with version 5 (the ultimate in driverless motoring) on the testing pad as we speak, that situation is only two or three years away.

What is this going to do to the mortgage market? We have testing times ahead.

One metric at the moment is paramount, mortgage payments rely on wages, and wages rely on jobs. If you lose your job and cant retrain for another, bang goes your ability to service a mortgage. House prices can only rise in line with rises in wages. We aren't in that environment at the moment. I would need to see what happens to the economy post Brexit and post lockdowns before hazarding an opinion on where wages are heading. As usual, I see the metrics pointing in opposite directions. New technology and new trading deals will help the British economy in the near future. This will initially lead to higher wages for certain sectors, but longer term I see technology eventually putting large swathes of the population out of work. That will tend to reduce the owner/occupier stats, and increase the rental stats. That will probably also lead to an increasing use of companies running the rental sector, and a more static market in terms of pricing. It will be more simple and more profitable to invest in such companies rather than entering the rental market as an individual.

One metric that keeps appealing to those who dont understand housing markets is the apparent disparity in those who want to buy a house on the one hand, and the number of houses available on the other. That has nothing whatever to do with the likely direction of the market. Lots of people want to buy a lamborghini, few actually manage to do so. In such markets the maths is simple enough. You dont buy what you want, you buy what you can afford. That takes us back to the level of wages.

If you dont believe me, look back at the house price crash at the end of the eighties. Almost overnight houses lost half or more of their value. Was there suddenly a drop in the number of people available to go out and buy? Of course not. The population level and those wanting to buy were roughly the same in 1991 as they were in 1989. But we will no doubt still get people trotting out the same old rubbish.

Conclusion:
2020 is going to be a year of testing times. Which way will things go? It's definitely a suck-it-and-see year. I dont believe the main movements will take place in pricing, but in the choice of area. Pricing is going to be messy. If you want to sell your tenth storey flat, I suspect the price you'll get will go down as the year progresses. If you want to sell a nice suburban detached house with garden, expect the price to go up. The real problem is going to depend on how many companies do go bust in the end, and whether there is an economic boom to come. The answer to that is in the lap of the gods. Not only that, but it does take time for things to work out. Conclusions are not going to suddenly appear. 2021 could well develop into as messy a year as 2020.

In the next episode of this series I will be taking a closer look at which metrics one needs to observe to get your bearings in the market. Do join me for that.

That was supposed to be the end of this week's property blog, but as I was about to do the audio for the Youtube version I received some news about the corona virus situation in the UK. I have to say I am appalled at what I hear. Let me make a couple of comments.

Governments make plans well in advance for coping with disasters. There is already a master-plan to deal with situations such as the Corona Virus Pandemic. The United States and Europe set guidelines on how to cope with such a pandemic. Broadly speaking the playbook was that young people should stay in school. Businesses should remain open, and people should carry on working.

The rules set out that you isolate the at-risk segments of society, in other words the elderly and those with preexisting conditions. If anybody becomes infectious or has symptoms, they should self-quarantine. Masks should only be worn by health care professionals or those believed to be symptomatic.

I am now told that the lockdowns are worse, and that one is even forbidden to sing carols in church this christmas.

Let me repeat that the UK with lockdowns has certified over 1000 deaths per million supposedly due to the virus while Japan, with no lockdowns has 23.

The only conclusion I can rationally come to is that the UK is ruled by a bunch of certifiable lunatics. And in the meantime I am trying to make some sensible predictions about what will happen over the course of the next twelve months. How, for pity's sake, how can one make any sensible predictions about what is likely to happen in a lunatic asylum?

I will continue to try, but those of you living anywhere in Europe are heading rapidly into a nightmare of insanity. Not for me, thank you very much.

The only sensible question to ask at this point is: When is the uprising planned?