Energy trap – how to escape reasonably cheaply

After next winter you could have spent over £3,000 on energy. That’s a sickening amount of money gone forever. I have written a lot about some elegant solutions, and indeed, if you have lots of money you can literally reduce the cost of energy to under 3p/ instead of the 50p (for electricity) we are soon going to bear. However rising prices from all directions are already stretching budgets so a fresh look at some less expensive options is needed.

So what’s the plan?

Stage 1:  We need energy and solar panels are the answer. A modest but useful array of 5kW is going to cost about £6,000. The returns on capital are about 30% so borrowing to do this makes sense. Bimble Solar offers interest free credit so there are definitely ways to get going without producing much cash up front. With electricity heading towards 50p/ there is absolutely no question that solar panels make sense and paying off the loan is better value than buying electricity. Solar panels don’t just mitigate your electricity bills, they can form an important part of your heating strategy too. Have a think about adding an ‘Eddi’ or similar to the mix. This channels all surplus energy to your immersion heater.

Stage 2:  Once you have free electricity you need the magic multiplier to leverage your investment; a heat pump. Although the Government will chip in £5,000 this is a step too far for most people when the total bill could be over twice that when all the connections to the existing system are factored in. But all is not lost. A mini-split (air to air) heat pump doesn’t get the grant but the cost, fully installed, is around £1,200. It doesn’t connect to your wet heating system to heat the whole house but it will provide a core of heat that runs free off your panels during the daylight hours. With one of these suitably sited the existing heating system can be left off for a lot of the time. An added bonus is that you’ll have air-conditioning in the summer too. Typically, these consume about 1kW and produce 3kW and there is a lot of choice to go bigger or smaller. I bought one from Saturn Sales and it works really well. It often consumes less than the rated figure so I wish I had opted for a slightly bigger one. It easily runs for free in the summer sun so the bigger version would provide even better air conditioning. Because the cold air sinks it pools across the whole ground floor; an unexpected bonus.

Stage 3:  You can sign up for an Octopus Go car charging account that will sell you cheap power.  4 hours every night for 7.5p/ This is a fixed contract for a year so you can lock in with confidence. They don’t mind what you use it on so the heat pump can bring the house up to temperature in the early hours, night storage heaters can be topped up, the immersion heater can kick in, appliances can run. You need to have an electric car on order at least – with a two year waiting list on some that’s not a problem. Just order one you can’t have now then cancel it later. You never know, you might even be able to flip your new car for a profit when it becomes available.

Stage 4: Cooking with gas and electricity is a big expense and needs addressing with two essential bits of kit. A microwave and a slow cooker. The microwave can cook so cheaply that at current electricity prices it could be just as cheap to buy ready made meals than to cook them yourself. Even cheaper of course is to build up some expertise on microwave cookery. A slow cooker consumes very little power and a hot stew is quick to prepare and always a good winter warmer. If you had solar panels they would trickle charge your lunch free of charge.

Stage 5: We all know about carrying our heat around with us in the form of a good pullover and the localised heat theme can be extended. An electric blanket on the bed of course but another one under the sofa cushions? If you have read my bit about turning down the thermostat here you might be glad of a localised hotspot.

The choice, before next winter arrives, is to do nothing and watch your money start to erode, or to start taking action at the early stages of this crisis and end up even better off than when it began. To consolidate your ideas check out a deeper discussion on Heating News – Spring 2022

Heating News – Spring 2022

Energy crisis edition          Nearly free electricity and a free car!

Price caps for everyone.

Oil and gas now costs the energy suppliers so much that they all have to charge right up to the government price cap and there’s worse to come in October.

All offers therefor will settle at about the same level, 34.64p for electricity and 8.38p for gas with some sneaky increases on daily charges. Meanwhile energy prices continue upwards so future caps are very likely to be even higher. The new norm for total domestic energy costs looks more like £3,000 – £4,000 and that’s money that has been taxed. I make this point because any savings you can make are tax free. As usual the discussion for remedies largely revolves around PV solar panels and heat pumps, preferably both at once. We’ll have a look at turning down the thermostat too – what actually happens.

Solar panel returns – worth it?

The 1,000 cluster: By a strange coincidence 3 solar panels cost about £1.000 fitted. They will have a bit over 1,000W power rating and make over 1,000 kW.hrs in a year.  At 35p per saved on your bills the 3 panels will make you £350 a year paying you back the £1,000 in 3 years.

So the deal goes a bit like this. You give me £1,000 and I’ll pay you back £350 a year for 3 years. Only then are you back where you started, which doesn’t sound so clever. However, by then prices could be up by 50%, at least, so you get £525 a year for the next 3 years (£1,575 ahead at this point) and then on the same basis another £2,360 over the next 3 years and so on. Crazy maths? Well electricity price rises have been steady at 8% a year and that was before the energy crisis so this all looks pretty real. Remember we are just looking at 3 panels for £1,000 here. Your real installation could be 6 times as big.

Not spending money on fuel bills puts money in your pocket but unlike other investments this is tax free and very like a pension scheme. On that basis PV panels make more sense for higher tax payers but still a good deal for … er … the rest of us.

New 240v solar panels

In the last issue I featured an Enphase Micro inverter with the comment that soon PV panels will have them built in as a matter of course. Since them Hanwha Q-Cells have launched a lovely all black, 385W panel (Q.Peak Duo BLK-G6+/AC 340-345 ACM) with the Enphase Inverter built in. So instead of high voltage wires going to one inverter box the panels all link up easily and deliver 240V directly to your mains circuit. The days of balancing strings, matching inverters etc are over. Now you can put panels in any shaped clusters that suit you. Enphase are having a major focus on Europe so we’ll hear much more from them in future especially when they use their superior electronics skills to launch a new electric car charger.

Turn down the thermostat – the real savings

‘The rate of loss of heat is proportional to the excess temperature of the surroundings’ So the warmer your house is relative to the outside the more energy you lose, and it’s a linear relationship. That makes the maths easy. If, say, your house is at 20c and its 5c outside the difference is 15c so a reduction of 1c on the thermostat reduces the heat loss by 6.66%. So, it’s the percentage reduction on the difference in temperatures. If it is 10c outside the difference will be 10c so a 1c reduction on the thermostat reduces the loss by 10%. Your bills corelate directly to this so whatever percentage is saved on the day is what comes off your energy bill, so the chances are you will be saving £200 or more over the year. One extra click down on the stat doubles the saving!

Solar PV annex building – the Powerhouse

Recently I have been pondering on the idea of an annex building with an integrated all solar roof. This involved juggling various layouts of panels, roof angles etc, so to prevent a whirling descent into madness I have constructed an Excel model that does all the calculations, right down to the finished size of the whole building. Happy to share if you are wrestling with the same ideas.

PV panels don’t like being roof integrated because they get too hot. The annex roof has an air gap under the panels so that air flowing upwards under them raises their efficiency. This slightly warmed air is directed into a void in the peak of the roof and then ducted down to your air source heat pump which runs very nicely on the warmer air giving a double whammy; better PV efficiency and better ASHP efficiency. In addition, the ASHP avoids the colder ground air and largely avoids costly defrosting cycles.  A similar concept is even easier to implement on a car port or garage.

The combination of an ASHP and the PV is a marriage made in heaven. Free power is turned into over 3 times more heat as all our small gains in efficiency are multiplied up by the COP of the ASHP. The Powerhouse makes electricity and heating and pretty much covers most domestic energy needs.

One attraction of the powerhouse is that it can be sited to point south unlike some houses which also suffer from shaded roofs, chimneys etc. Also, the local planning committee will tend to look more favourably on applications that involve innovation and ecologicalness.

What about batteries?

After the sun goes down batteries deliver free solar energy back to you; …… or do they? Actually, the batteries cost money to buy and they degrade with every cycle so there is effectively a charge to your pocket for each kilowatt.hour they store and you’d be shocked by how much. Ordinary lead acid batteries will charge you nearly 50p to recycle a kilowatt.hour, so more expensive than the mains. It gets better with lithium batteries with 20p a regular figure and 5.5p seems to be the limit. So, if you choose carefully the batteries will beat the mains on delivery cost. The Bimble Solar web site lists masses of batteries with their energy delivery costs so check it out before you buy.

Cheeky thought of the day. The Tesla power wall costs about £8,600 and stores 13.5kW.hrs and like all batteries it wears out in time and has to be replaced. However, the battery in your electric car is much better than that and if you are leasing the car you don’t care about degradation. So check out two way charging where you can get power out as well (V2H). The cost comparison is interesting. 4 Powerwalls would cost £34,400 but the batteries in a Nissan Leaf store more for the same money and they come with a free car thrown in as well! I admit it’s early days for this type of thinking; V2H chargers are expensive and not many cars support V2G or V2H but you might as well get ahead of the curve for your future energy strategy. At the moment you are probably looking at a Nissan Leaf and within a year a VW.

Late night power for car charging costs 7.5p/ with Octopus Go. What this all means is that two way charging with a battery makes your electricity cost 7.5p/ as opposed to 35p++ and that makes a leased electric car a viable consideration. I’d still think twice about buying one with ready money though as depreciation is likely to be bad while electric car pricing changes from a premium to a discount.

To underline the significance of all this. Your car battery will easily run a 3kW heat pump over a winter afternoon and evening consuming say 21kW.hrs and delivering 63kW.hrs or more to your heating. A 7kW wall charger will recharge your battery with 28kW.hrs later that night for £2.10. There will be some efficiency losses but the astonishing fact is that solar panels + car + heat pump will slash your energy costs to below 5p when everyone else will be paying 50p odd.

While doing your sums, don’t forget night storage heaters. They store energy more efficiently and cheaply than batteries. Everybody hates this old technology, especially with electricity prices soaring, so you might find some cheap ones on Ebay.

The technology for all of this exists now, heat pumps and electric cars will soon be the norm so many of us will be ready for this anyway. Storing energy makes renewables work better so it makes one wonder if we need to build more nuclear power stations.

Heat pumps update

The renewable heat incentive on heat pumps ended in March 2022. Instead, you can get £5,000 for an ASHP and £6,000 for a GSHP. Your installer makes the claim so you might not actually find all this money in your own pocket. All this leaves a big question over heat pump viability especially with daft quotes from the suppliers.

If you have town gas, why bother? Heat pumps run on electricity that costs 4 times as much as gas.

Gas boilers are cheaper and usually much more powerful and they almost certainly suit your existing system.

In favour though:

If you make your own electricity then a heat pump is a perfect partner.

 A small mini split system (air to air) is about £1,000 and will run free on your panels – it does not qualify for the grant though.

Using surplus electricity to run the immersion heater means you don’t need a new water tank so a heat pump installation will cost less. Knocking say £2,000 off your heat pump quote will buy you some PV panels.

There’s a theme emerging here: Get some panels running before you even think about a heat pump.

Solar car port

A simple car port with some 240v panels must be an early consideration in the energy battle. Cheap to put up, no scaffolding, no roof attachments just useful power and a new useful building. A 4×5 panel layout is likely, so about 7kW and £7,000.   By the way – have you seen postcrete in action? Stick a post  in the hole, pour the dust around it, make sure it’s straight then pour in some water; job done. That car port will be up in no time.

The latest 240v panels, with their own microinverters built in, allow us to make some improvements as they don’t need string matching and we can vary the tilt angles. The highest row can be tilted up slightly without making the car port too high and the lowest row can be tilted down to pick up more winter sun. Assuming you are going to put panels somewhere on your property the car port makes a sensible option. With no rooftop scaffolding costs this is an easy construction with space for as much power as you need and you add value to your property too.

The air cooled roof idea works really well with a PV car port and even more so with my air assisted hybrid ground source heat pump. The hot air under the car port panels is blown down through a string of radiators and that warmed water makes the ground source system work better. See

I was plugging this idea when the incentives were in the order of £20,000 ….. too late now and not worth doing on the reduced payment but an air source heat pump working with the car port makes sense.

Driveable solar annex. The latest energy costs have made it time to review my mad idea for a solar powered driveable house. Apart from being a massive power supply with its sun tracking solar array (makes £2,500+ worth of electricity a year) it can earn over £1,000 a week on AirBnb. The transmission has been made much simpler and easier with regular car parts and the panels now mount on one side – the other side is all sliding glass doors for your viewing pleasure. Catch up here.

Since this drawing further thoughts have made the design even easier. A bespoke container room dropped on the chassis makes it all easier and a slab of solar panels across the top help to make an awning over the sun deck. Job done.

Driveable housesliding


Casio LCW-M170TD-1AER Lineage Waveceptor

You might remember me going on about my Casio solar powered and radio timed watch. Some 15 years on with no new batteries or straps it is still ticking on faithfully. However, Casio have made a new watch which has been reviewed as maybe the best watch in the world. I’ve bought one and it’s hard not to agree. Super light, slim and with solar and radio timekeeping. One amusing feature is the second hand. It figures there is no need to tick if you can’t see it, so in the dark it just parks until light returns then it shoots round to find the exact second. The titanium case and strap are a dull grey colour which gives a more grown up, less bling, look to a very understated watch. I love it.

Expanding Camping Trailer – by Original Twist

Expandable camping trailer.

Tents makes sense – a small package opens up to become a big thing. On that logic a caravan looks daft. Towing a big thing full of empty space – dooh. It is more sensible to have something that can be towed easily, still full of all your kit, and then be opened up on site at the press of a button. A full off-grid energy system built in would be the cherry on top and a satellite dish that gets the footie running straight away wouldn’t hurt either. And that brings us to the

Original Twist Camping trailer.

You know those tool boxes where the top parts push away to reveal the box underneath? Well this trailer is just a big one with wheels on. The door frames at each end support the roof and lift it just like a four poster car lift. You arrive on site, the roof lifts up, the sides pop out and the roof closes down on them to lock and stabilise. The links that control the movement of the sides are steadied with torsion bars and chain and sprocket ties so powering it all is quite simple. Just one electric motor to make it all open up. The drawing shows one half closed and the other open; in practice both sides deploy together. The roof lift easily copes with the weight of the solar panels, dish, awning etc.

The side pods can contain beds with lights and TV built in and/or a kitchen unit. The choice is yours.

A shower room can be fitted over the draw bar as a separate cubicle that is entered privately from the main living quarters.

This design could be scaled up or down. Here it starts as the size of an SUV, for easy storage and towing, but still sleeps up to 5 when you get there. A bigger version would be sensational when deployed; imagine rolling into the campsite and opening up straight away, the dish locks on, footie on, beers out, all in about 2 minutes. A caravan that’s 4 metres wide before any canvas extensions go out! Stand by for a crowd of onlookers.

Heating is by a truck cab mini heat pump or gas.

The generous PV array raises an interesting question. If your electric tow car also had panels on the roof there could be significant range extension when all the panels are combined. In the new electric era tow cars will need all the help they can get. Note that the PV still works when you get home so it makes a useful uninterruptible power supply for your house – unless you park in your garage of course.

So there’s the idea. Does it exist? No, not yet, but let me know if you would like to build it and I’ll let you know how all the links work.


Fits in a normal garage

Easy to tow – only as wide and as high as a car

Aerodynamic for economical towing

Automatic opening out and closing in a minute or two

Almost doubles in size

Roof raises for full height interior

Comparable with the biggest caravans

Sleeps 4 – 5

1.5kW of solar panels (4x 380W)

2kW inverter runs 240V fridge, TV, microwave, kettle, tools, lawnmower etc.

Built in awning and cover

4th solar panel folds out to make porch cover

Moulded in satellite dish recess on one roof, covered when stowed

The drawing is done to fit existing solar panels but they are already bigger and better with 400W panels a good fit. Imagine a matching moulded roof on your tow car with another 3 panels fitted. A fantastic look and 2.4KW in total which is over 3 horsepower. Quite possibly this combination might be more economical to tow than a car on its own!

Plug all that in when you get home and watch those heating bills crumble. At next winter’s projected prices that’s well over £1,000 worth every year. While turning over energy ideas consider that your electric tow car has the equivalent of four Tesla powerwall battery things built in so your trailer is not only a monstrous power house when on the move but also a major part of your domestic energy strategy too.

Vehicle to grid chargers are the next big thing. At the moment it’s all possible if your tow car is a Nissan Leaf.

Heating News Spring 2021



Microinverters have passed an important tipping point and will soon be all the rage, but first, what are they?  Grid tied PV panels usually feed high voltage DC current to a single inverter which converts that power to 240v AC. High voltages present safety issues and shading can reduce efficiency of the whole set, although, as thousands of examples testify, this system works well enough. But there is another way gaining traction – microinverters. These neat little boxes bolt up under each solar panel and make 240v right there, on the spot, with simpler wiring too. At a stroke the shading problem disappears, voltages are reduced and individual panel monitoring is possible. The monitoring is the best bit with the whole array mirrored on your PC screen. Each panel shows how it is performing and all the relevant history is retained for your viewing pleasure. The system is completely expandable and more panels can be clipped on at any time. The only drawback is higher cost with prices around £100 for each microinverter compared to a single inverter like the £1,000 Sunny Boy 5kW, but as you will see below that balance will soon swing the other way.

Panels – More power for same money

The case for going solar gets more compelling by the day. How about an all black JA 370W for just £130! Three of these with micro-inverters would cost £690 plus fitting etc so the ball park is around £1,000 for 1,000W of power (or better) and just over 1,000 kW.hrs a year of production. 1000 for 1000 for 1000!

So how many panels do you want? And what do you get back? Well, that 1kW pack of 3 will make £180 worth of electricity (at 17p/ if you consume all they make, but only £58 if you sold the remainder to Octopus for 5.5p. That makes annual paybacks of a rather good 5.5 years or a bad 17 years so there must be a sweet spot in the panel count. Your background domestic consumption with lights computers and fridges will often be around 1kW so the first 3 panels/1kW are definitely worthwhile. However because panels rarely produce their rated output, and never in winter, the first 9 panels/3kW should be deemed good. All the rest will  boil kettles and run appliances from time to time but after around 4kW and 12 panels any extra will be bad ones unless you can increase your self consumption. One great way of doing this is to route any excess production to your immersion heater and a SOLiC 200 for £195 will do that for you. With that fitted your 12 panels will always be enough to spin up a domestic appliance with all the excess being used to heat water and give a 5.5 year pay back. A couple more panels might be justified to give better utility without diluting the payback too much so it looks like 14 panels might be the sweet spot for most households. All this kit is expected to last for 20 years: pretty compelling when electricity prices have been increasing by 8% a year.  If that 8% persists then payback falls under 5 years and you’d recoup the same amount again after just three more years and then 10 times your money over the expected life of the panels. As I say, it’s pretty compelling

 Of course, if you are running a heat pump then more self consumption will justify more panels but If you have town gas you’ll be making hot water much cheaper than with electricity and that will drop your panel count.

And what about car charging you say. Well, yes, that too makes for more self consumption but, just to rain on that parade, Octopus are offering power for car chargers at 5p/ for 4 hours a night so don’t up your panel count too much and maybe not at all.

Astonishing high power panels – 540W!

High powered panels are here. For example Canadian (it’s a company) are offering a 540W panel for £200. Expensive alright but with micro-inverters it’s a game changer. Take our 3 panel set above for 1,020W and, with 3 micro-inverters, £690. Then compare 2 x 540W Canadian panels for 1,080W and only 2 inverters for a total of £600. Overnight, higher powered panels have made microinverters the best choice. The best you can get is the cheapest option. No doubt that is going to be the way forward from now on and it would make sense if panels started to come with inverters built in too.

C.E. approved ground source pump for £1,600

You might recall my design for a hybrid ground source heat pump that optimally combined air and ground heat sources. Full RHI payments and less digging etc. If you are contemplating this you’ll be interested to know that a 10kW C.E. approved ground source heat pump unit can be found on Ebay for £1,600. That makes a great start when you think that around £20,000 is the usual cost of a regular installation.

Mini-split heat pump – up and running

We had an unheated laundry room and a small Mitsubishi mini-split (an air to air heat pump) has made a perfect addition. It heats the room while blowing warm air over the clothes racks. In summer the cooling setting will make ironing bearable and some cold air will spill out to make a cool refuge in the adjacent room. Brilliant.

The kit was installed in about 4 hours and the total cost, fitted, was under £1,000. As soon as the solar panels are installed it will run for free but when I checked recently it was only drawing about 350W so no stress there. Solar panels output can be excessive in the summer so running the air conditioning will increase self consumption and be guilt free too.

Property crash coming soon

Death, Debt and Demography – property peril

UK going ex-growth

If everybody in the U.K. was made to stand in line according to age they would make a giant bar graph like this. Your place is there too; as you grow older each year your own line takes a sideways step to the right, and so does everyone else’s.

The steep ramp down to zero starts earlier than you would expect, from as young as the mid fifties. This is due to population growth (fewer people were born in the past so the corresponding lines are smaller) and also early death. You don’t have to wait for old age to join the 542,000 deaths each year; over 300,000 die from cancer, dementia, heart and stroke, all of which can strike prematurely.

The chart illustrates how demand from an ever increasing population made the meteoric rise in house prices inevitable. Look at the biggest and tallest block on the chart – the sixties baby boomers. The biggest population surge ever seen, grew up, got jobs and bought houses as fast as they could be built. Easy access to cheap money accompanied the latter days of the surge so it was inevitable that the run in prices would continue into territory that now looks uncomfortably overbought. That is just the nature of markets.

Once the rush started a new ‘truth’ emerged. With prices perpetually rising, for many borrowers there was no question of repaying their interest only loans; they could always sell at a profit, pay off the debt, buy a car and live happily ever after. This sort of thinking actually worked when prices kept rising; even the lenders got sucked in as their loans appeared to be safe. Old habits die hard it seems but what happens to those loans in a stagnant or falling market? Debt is a deferred payment which has to be paid by someone. Could it be that current buyers are not fully aware that they will have to pay back every penny? Now those mad days are over some recent house purchases may never be paid for, much to the chagrin of the lenders. An unfortunate knock-on from this mistaken optimism is that it inevitably depletes the inheritance tally of the next generation and their ability to buy a house.

Today the bulk of the boomers are middle aged, employed and at the height of their earning power, they mostly bought their houses cheaply and have seen their equity rise enough to borrow against it. There is a smart car on the driveway (brand new for one in ten households), holidays, restaurants, life is good. The bounty doesn’t stop there though, their parents are dying, a house is inherited to be sold or rented out. If only life could be so easy for everyone. The chart says no.

After the peak of the boomers the birth rate started to decline, 13 years in a row, and that signaled the end of their powerful influence on property prices and a lot more besides. The big arrow on the left of the chart shows the annual birth tally in gentle decline for the last 50 years. For now, births still exceed deaths so the population is still growing but births initially make more expense for the very group that is already struggling with high house prices.

The arrival of the baby boomers caused some seismic but positive effects and now, as they start to retire, we can expect to see some negativity as those effects are reversed. More people will retire for each of the next fourteen years until half the current block of baby boomers is drawing pensions with the other half still to go. From 2020 on, retirees start to overwhelm the young earners (backward slope in their area) coming up behind them.

The chart has an even bigger story to tell. Note the two big arrows on the chart and the abrupt change in direction just where the baby boomers peak occurs some 50 years ago. This is a momentous event not seen before for centuries; it signals the end of population growth and the start of a new ex-growth era. The effects of this will be profound, affecting pensions, business, stock valuations and more. As the change takes place the money – that washed plentifully over industries like travel, baby goods, retail, house builders and automotive – is drying up, with results that have recently been all too obvious. Sector by sector is succumbing to a lack of cash. The change is well under way with a lot more to come. House prices will be next. Ironically, as the wealthy baby boomers decrease their spending the resulting job loses are born by the next generation and job uncertainty holds back house buying decisions.

The Government will have to fund all the extra draws on the NHS, pensions, debt funding etc. by increasing taxes or borrowing more. But with the number of tax payers declining the Government will have to sell more bonds and this at a time when pension funds become net sellers of bonds (to pay out the pensions of course). With fewer buyers for bonds the only way to make them more attractive is to raise yields and this devalues existing bonds so even more have to be sold to pay the pensions. This is just one example of how ex-growth U.K. faces some intractable vicious circles. The point though is that this puts upward pressure on interest rates. The bank base rate is now 0.75% so there is very little scope for a fall so when change does come it is likely to be bad for property prices.

Excess personal debt is a major threat to property prices. On the surface daily life looks normal and secure but in reality it’s artificially and precariously propped by debt. We’re flying by pulling on our bootlaces. Whether through poverty or imagined wellbeing, personal debt continues to grow. Average household credit card debt is now £2,603 – pretty astonishing for the average. It seems unlikely that anyone needing this much debt can pay it back very quickly and it is predicted that the figure will increase substantially in the next 4 years. Average adult debt for everything including mortgages is £59,823. With record debt there is hardly a wall of money heading towards the property market.

Then there is government debt. As the retirees swell to well over 17 million that produces an annual pensions demand of around £170 billion not including the extra demand on the health service. The pensions industry and the Government need to be ready for this. The former already have their prudence being tested (or exposed) by the ex growth phenomenon but the problem for the Government is more acute. Pensions have always been met by the expanding set of workers following behind; a system that always worked when earners were growing in number. After centuries of habit forming complacency that era is now over. The new paradigm must involve extra taxes and borrowing. In contrast to the private pension system there is no Government pension pot, just borrowings of over £1,800,000,000,000 which is £56,000 per taxpayer and nearer £75,000 when future pension obligations are added (a promise to pay in the future is a debt). With talk of ‘fiscal headroom’ and post Brexit expenses looming these totals will certainly increase. There is talk about the end of posterity but that’s a word we can expect to see again.

The property boom has divided society into two halves. The people on the right half of the chart live in houses bought cheaply and they are very well off. All the people on the left don’t have a house and can only ever buy an expensive one; after rent, rates, general living expenses these are the people with credit card debts instead of savings.

Take the younger group shown in grey; they are starting out on their careers with little chance of buying a house of their own except via inheritance or parental gifts. The national house price to earnings ratio might be at a peaky 6 but that’s an average. Take a typical cookie cutter house in the south of England for £450,000 and the average wage of £26,364 and the ratio is 17; totally unsustainable, especially as hopeful buyers trapped in expensive rental properties are more likely to be in debt rather than building a savings pot. Let’s be clear about house price to earnings ratios; if the ratio is 17 then it would take ALL your earnings over 17 years to pay for it, and that’s before interest. Potential buyers for houses at the current prices are not in this grey group.

Obviously there are buyers out there, not very many though and declining by the year, but there non-the-less. In the home counties in particular properties are being bought by new millionaire Londoners cashing in before prices retreat further.

And buying still makes sense right? The agents saw high demand for these high priced houses which were sold quickly too – business was booming. Hold on, hold on; that’s the first danger sign slipping by – high turnover. Turnover so high that your local high street can support several estate agents (but no banks) – something weird there. When there are too many buyers or too many sellers there is an imbalance and transactions are relatively low. When there is a transition from one state to another there is a period when sellers exactly match the buyers; perfect conditions for a peak in transactions and peak agents. Logically, when transaction volume is high the market is turning. What looks like a buying frenzy is actually a subtle warning sign. The bubble is about to burst. Is that now? The house builders, are no longer making hay – maybe change is in the air?

A market correction has never amounted to much before and setbacks have always been ironed out over time. You can’t go wrong in bricks and mortar can you? Well things might be different this time. At this point we hear the call ‘there is a massive property shortage so prices can’t possibly fall’. Actually there is a shortage of ‘affordable’ property, but there is no shortage at all of ridiculously expensive properties, the market is flooded with them. You might note how half of them have price reductions; they are not exactly being snapped up.

It would be no surprise if Brexit goes down in history as the trigger that turned the property market and burst some other bubbles too.  The transition will certainly be disruptive in the short term. There are thousands of areas where there will be a threat to jobs and in turn a threat to property prices.

Watch the pound carefully while Brexit unravels. Any need to defend a weak currency could raise interest rates and that will make holding or buying property even more expensive. Actually it makes everything more expensive; a country with a huge debt burden can only expect huge interest burdens when rates rise.

It can’t be sensible to be invested in an overvalued asset class while all this is going on. Buy-to-let investors (already taxed and stamped) are reasonably liquid and might well see the sense in locking in profits right now. Any obvious downturn in the market will set them selling and after that most buyers will step back to watch the fall.

So, to summarise; property prices are unsustainably high, the money that bought them was easy and cheap but is now evaporating. The ex-growth G.B. effect has kicked in disturbingly early with still more jobs at risk. The market may be turning now, or very soon, and when it does the fall will be sudden and without respite. Bubbles don’t burst quietly.

Follow up March 2020:   Well there we are; the pin to burst the bubble has arrived and all sorts of unexpected consequences are popping up. One yet to be seen is the effect on the lenders as their clients lose their jobs and maybe even their lives. In short they have lent on overpriced collateral to clients who can’t pay them back. A black hole in the accounts will decrease the funds to be lent. If turning off the money tap doesn’t trouble the property market I’d be very surprised.

Kenya – Turi reunion

Kenya reunion
December 5th 2018 – Wednesday
12pm  pub, Chelsea

Kenya watu at the Surprise

Well that was fun – Please get in touch for the next one, maybe next Summer.

Were you at school in Kenya circa 1955 – 1965?  Turi maybe. Come and meet some old friends next time.
Where are you?    Susan Casson, Gill Neville,  Arthur and Alice Brown, Simon Jefferson, Geoffrey Peatling, Gail Nichols, Pippa and Fiona Mills, Charlotte Gaitskell, Paul Skinner, John Sutton, Timothy Upton, Janet Lloyd, Robbie Godkin, Elspeth McPherson, Richard Lowenstein, Liz Phelips, Johnnie Sherwood, Jane Faber, Alan Riley, Fraser Roberts, Belinda Foxon, Susan Kennedy.
Let me know if you can come .. contact form below.
Patrick Littlehales