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{ in·deed·a·bly }

adverb: to competently express interest, surprise, disbelief, or contempt

North Star

The walk down the promenade was depressing. Seven out of every ten storefronts were boarded up. Litter playfully danced through the teeming downpour, propelled by miniature whirlwinds. At least the rain helped dilute the puddles of piss and pavement art decorating the badly maintained footpath.

Welcome to the North” read a faded poster, dangling precariously in an abandoned shop window. The poster featured the image of an iconic sculpture silhouetted by sunset. The shop’s leaky roof causing the colours to run, transforming the modern Angel of the North into a foreboding ancient Viking blood eagle.

Welcome indeed. At least the locals seemed friendly. The homeless, begging from doorways and outside fast-food outlets. The elderly and the disabled, collectively forming a sizeable portion of the local population. A sizeable population in more ways than one, understandable given the tiny fruit and vegetable section of the local supermarket was both grim and expensive, while the greasy chippies and dubious kebab shops on most street corners offered a more affordable, albeit less healthy alternative.

Head down, I questioned my life choices as I trudged through the rain towards where I was staying.

It was located in a new build housing estate, not far from what in more prosperous days gone by may have once been described as the town’s business district. Peeling billboards proudly proclaimed three-bedroom family homes for sale, available to buy via shared ownership schemes, starting at just £125,000.

Car parking spaces located a mile from where I live cost more than that!

After a while, Londoners stop seeing the “London tax” levied on just about everything, the toll of residing in the capital. Escaping the big city bubble every now and again helps regain some perspective of how the rest of the country lives and views the world. Not because they are right necessarily, but because there are lots of them and they vote. Their struggle is real.

Out of curiosity, I had done a little bit of internet research into those advertised properties. Located on one of those infamous new build estates, where the houses were sold on a leasehold rather than freehold title. Each home purchase including a complimentary automatic ratcheting service charge, with increases so punitive they would make a seasoned loanshark blush.

Constructed from lowest cost materials at the height of a property boom. Traditional bricks and mortar replaced by cardboard and duct tape. Creating a perpetual maintenance nightmare for the house proud owners. Repairs they couldn’t afford, given local wages are roughly 20% lower than the national median.

I ran some quick numbers.

To rent such a property would cost roughly £145 per week, or £7,500 a year. Consuming in the region of a quarter of those lower than median wages.

Buying the property would require a deposit, starting at the equivalent of a year’s annual rent. A challenge, yet one that should be achievable for a family who chooses to live within their means.

Assuming they took out a mortgage with a fixed rate honeymoon period at current market interest rates, their repayments might include an interest component of £66 per week, or £3,450 over a year.

At first glance, owning in struggle town represented a clear cash flow win, with mortgage interest costing less than half the equivalent rent. An equation likely to become less true once that honeymoon period ends, as interest rates inevitably climb to ward off inflation.

Of course, at this shallow end of the property market, an interest-only mortgage would not be an option for many. For lenders, the numbers are too small and the risks too large to make the commercial proposition worthwhile.

So the homeowner would probably have a repayment mortgage in some form. The capital repayment component of which increases their outgoings to roughly £125 a week, or £6,600 over the year. Still a cashflow win over renting, though this simplistic comparison ignores the additional ownership costs of service charges, maintenance bills, and buildings insurance.

Some would argue capital repayment components notionally represent savings rather than spending, as each payment increases the homeowner’s net worth by reducing the amount they owe.

Others may argue that the homeowner already enjoys the full benefits of ownership, in that they get to keep any capital gains realised upon the future disposal of the asset. This occurs regardless of whether they repaid capital amounts throughout the term of the loan or simply cleared the mortgage balance in full when the property was sold.

At this point, it becomes a head versus heart debate. A “forever” house owned free and clear may grant the owner a feeling of financial freedom that no passive income stream could hope to match.

Spending the best part of a lifetime gradually chipping away at the mortgage represents the greatest financial achievement many people will make. Instinctively embracing a “slow and steady” approach, striving for housing certainty before their income plummets over the financial cliff that is retirement.

Financial alchemists would argue the homeowner’s money would be better off invested elsewhere.

Asking themselves which asset class is more likely to outperform over the long term? A single-family home in struggle town? Or the multinational megacorps of Silicon Valley and Wall Street?

Whether we think about it in these terms or not, each capital repayment component of a mortgage represents a new investment. Every. Single. Month.

By all means, make those investment decisions to repay the mortgage. But do so consciously, only after understanding the potentially vast opportunity costs involved in doing so.

The next morning, I quickly packed my bag and gratefully departed my lodgings. I wouldn’t miss the blocked toilet. Nor the slowly putrifying body of a dead dog hanging out of the communal garbage bin. There are some wonderful places to visit or live in the North, this simply wasn’t one of them.

A few hours later I emerged from a busy train station, to be greeted by all the noise, bustle, and pollution of the capital. An enterprising homeless guy begged for old phone handsets outside the station entrance. The aroma of a falafel stand wafted down the street, same ingredients as the struggle town equivalent I had walked past the night before, the only real difference was the price.

Endless buildings of new build apartments lined the train lines on my way home. Freshly painted billboards proudly proclaimed “more than half sold”. Just like the properties up North, these were “affordable” housing targeted at first time buyers. Near good locations, yet in every case compromised in some way. Backing onto motorways, train tracks, electricity substations, or water treatment plants. Constructed from the same lowest cost building materials.

Again, the only real difference was the price.

Forget a three-bedroom family home, those were priced in the mid-seven figures. No, an “affordable” home in this context was a one-bedroom shoebox with asking prices 7x the cost of those family homes up North. If only incomes of those wishing to purchase matched those multiples! But alas, they don’t come close.

Those houses in the North offered prospective landlords a gross rental yield in the region of 10%.

By comparison, these apartments offered a gross rental yield of less than 6%. Factor in financing costs, service charges, maintenance, management costs, and prospective landlords would face a breakeven cash flow proposition at best.

Their investment represented an optimistic bet on the future of London. Buying in hope that their property’s price would rise faster than the prevailing market. Delivering real capital gains, that exceed their holding costs.

The approach might still work. It certainly used to back in the olden days.

The closer to home I travelled, the higher the property prices soared. In substance, little different to those abodes in struggle town. Four walls and a roof. Similar sized footprint. Containing the hopes and dreams of their aspirational occupants, combined with their hoard of worldly possessions.

By the time we arrived at my stop, the property prices were over 10x those of the struggle town family homes. Low seven figures. A small fortune when viewed from afar, sparking envy and jealousy. Mere table stakes for those who lived in the capital, residents feeling no closer to rich than those up North.

Which made me stop and think.

Someone from my neighbourhood, who cashed in their chips and relocated to struggle town, would be free in a financial sense.

Financially, it would likely be a one-way trip. Yet potentially a life-changing one, that would make options like early retirement or pursuing a lifestyle vocation immediately accessible options.

The same person choosing to stay put would be consciously consigning themselves to the continued “real life” struggle experienced by those born and bred up in struggle town. Potentially earning higher incomes, which were more than offset by higher housing costs.

Housing locations are an endlessly fascinating trade-off. The right answer evolves throughout our lives.

Living like a student in a group house may appeal for a while, but becomes less desirable for a loved up young couple, and is incompatible with the needs of a family with young children. Things come full circle in our dotage, we just refer to the group houses as aged care homes.

School catchments don’t matter at all, then matter almost to the exclusion of all else, before ceasing to matter altogether.

Healthcare follows a similar arc, barely crossing our minds until we find ourselves stricken by disease or disability, at which point it soon dominates every facet of our lives.

Employment opportunities matter a great deal at the beginning of our careers. We start out full of starry-eyed ambitions. Believing that we are destined for greatness. To occupy the big chair. Make the big decisions. Earn the big bucks.

Before long, reality dawns.

The realisation creeps in that advancement and success are a steep pyramid. A zero-sum game.

Every person who successfully climbs a rung on the career ladder leaves behind dozens of former peers who never will.

Eventually, all career trajectories plateau. Top out. Commence their descent.

Hopes fade. Dreams die. Priorities compete. Obligations, responsibilities, and demands accrue.

Whether we realise it or not at the time, this represents a turning point in our lives.

Some choose, through apathy or conscious decision, to battle on against the inevitable. Keep on grafting. Grinding away their lives pursuing the same salary levels, and the ever so slightly declining purchasing power they provide. Eventually, some will pay off their mortgage, freeing up cash flow, and improving their quality of life as result.

Others choose to seize the moment. Recognise that their race has been run. Hit eject and bailout of the corporate game of thrones in pursuit of happiness, fulfilment, or quality time with their family.

This second group may decide to sell up and move somewhere their money will stretch further. Geographic arbitraging their way towards a life with greater control over their time, granted by lower housing costs. Perhaps somewhere like that struggle town.

Of course, such an option is only available to those who made bank during the early days of their careers, and who managed to retain rather than spend a reasonable proportion of that sum. Decisions compound the same way investments do, only with more transformative and life-changing results.

I grew up somewhere not dissimilar to that struggle town I had visited. With the benefit of hindsight, moving away to seek my fortune was one of the best financial decisions I would ever make. Yet once accomplished, there is a lot to be said for leaving the rats to their race, and returning to a small pond where we can enjoy life as a big fish.

My school friends who stayed continue to live that struggle town existence. No happier or more satisfied with their lot in life than the “everyman”, but certainly financially poorer for it.

Interestingly, the majority of the migrants I have met in London over the years eventually pack their bags and depart for pastures new. Some of the most driven and self-motivated people I have ever met eventually recognised that chasing money in the big city is just a phase, not a final destination.

They subsequently prioritised lifestyle, funded by savings realised via geographic arbitrage supplemented by income earned performing lifestyle jobs.

The happiest of those appeared to accept and embrace the end of their climb up the career ladder. Opting for “retirement” jobs, usually a rung or two below where they had topped out, because the same range of opportunities just don’t exist in struggle town. They opted to retreat back to a level where the work involved more fun and less responsibility.

Carving out pocket empires well within their comfort zones, performing roles they could do with their eyes closed, but which offered the sought after flexibility due to the shallow local talent pool. Working for small local firms, regional universities, or a provider of government services.

It isn’t the only way to play the game of life, but as far as game plans go it has a lot going for it.


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17 Comments

  1. PJH 17 April 2022

    So. Which part of Gateshead was it? Cant imagine it was Newcastle….

  2. monkeysonaspinningrock 18 April 2022

    As ever, really enjoyed your writing style Indeedably! I’m currently trying to navigate this sort of transition (albeit in less dramatic style perhaps) – having worked away at the full on London job for the best part of a decade, kept spending in check and invested the proceeds, I’m now negotiating a more ‘9 to 5′ part-time role with a pay cut but which should hopefully allow for spending more time with a new addition to the family. Some colleagues get it (mostly the ones with kids themselves), others are bemused as to why you wouldn’t just keep chasing the money/’prestige’ forever, but ultimately I think it comes down to knowing what your current priorities are and accepting the trade-offs that come with that.

    • {in·deed·a·bly} 18 April 2022 — Post author

      Thanks monkeysonaspinningrock.

      Good luck with the change in priorities and adjusting the balance, I hope it provides you with what you seek.

      Beware the “part-time” trap, where you end up doing a full-time load in part-time hours and for a fraction of the pay. Many a new mother returning from maternity leave could recount horror stories on how this can play out when the rest of the workplace operates on a full five day working week while they were trying to just work during school hours or a subset of days. It can work, but success requires everyone to make the adjustment, not just the employee seeking to cut back on their working hours. That can be a big ask if you’ve previously been the “go to guy” with the safe pair of hands who made all the problems go away.

      • monkeysonaspinningrock 18 April 2022

        Thanks – I’m very conscious of that trap having seen it play out before as you say, so am treating this as an experiment (probably for 12 months or so), and if it doesn’t work well then I’ll try something else. I suspect that a big part of the challenge will be politely but firmly saying “no” to tasks that realistically won’t fit in the time available, even if that’s not the most comfortable conversation when all your colleagues are extremely busy.

        • {in·deed·a·bly} 18 April 2022 — Post author

          Sounds like a good approach. The other trick is learning to distinguish between the genuinely value adding tasks and all the noisy and busywork that comes with any fulltime gig. If you’re able to focus on the former then your worth to the organisation is essentially the same, but so much of whether that is possible comes down to how sensible your line management happen to be. Hopefully you can avoid the tinpot tyrants and micro-managing incompetents!

  3. Ryan 18 April 2022

    Another fantastic article as always. I just love your writing style.

    My one piece of feedback is it doesn’t break any stereotypes of the north and that in the North you cannot command a stellar salary. Appreciate this was the particular place you were in but I always makes me smile as Northerner ☺️

    But I appreciate your point in that perhaps there isint much difference in terms of quality of life.

    I think there’s a happy medium to be had which the article perhaps didn’t touch on. There’s unbelievable opportunity in northern cities like Leeds, Manchester and Sheffield with more reasonably priced housing but everything else you would want (schools, amenities etc).

    I have friends in London working all hours and barely seeing their children (or each other) crammed into a 3 bed terrace paying a huge mortgage. I do wonder as you’ve pondered what the end goal is.

    I sometimes feel like we’ve hit the jackpot to be well educated, financially aware and living in a (relatively speaking Vs London) lower cost of living area. Still challenges!

    As Rightmove says I hope more people find their happy place.

    Thanks for writing!

    Ryan

    • {in·deed·a·bly} 18 April 2022 — Post author

      Thanks Ryan.

      Like anywhere, there are some amazing places in the North of England that offer great quality of life. And, like anywhere, there are some places in the North of England that fail on all those counts. This particular struggle town was unfortunately one of the latter.

      That contrast exists within any locality, London included. Perhaps London especially.

      The folks who win at life manage to find a sweet spot where their incomes are more than sufficient to cover their desired lifestyle costs. Those who settle for too little, or chase too much, doom themselves to a life of endless struggle. It sounds like you and your family have succeeded on this front, a commendable achievement that I applaud.

  4. Full Time Finance 18 April 2022

    There is one more option on my experience. The middle ground. I live in an area in the US that is moderately expensive but also have higher wages. There also seem to be some places were wages have out paced costs. Finding them is a challenge. Wish I could say I planned life that way. I lucked into it.

    I enjoyed the rural areas of North England the last time I visited for work. But then again my employer was the only industrial business for a long distance. I doubt there was much wage competition and thus lower wages.

    • {in·deed·a·bly} 18 April 2022 — Post author

      Thanks Full Time Finance.

      You’ve nailed it, findings the happy while leading a lifestyle comfortably supported by the (local or remote working) wages on offer. In theory, that should be possible just about anywhere. Though it becomes more challenging in expensive parts of expensive cities, or remote rural locations with precious few jobs available.

  5. weenie 19 April 2022

    The advice to ‘move up North’ is often seen as unrealistic and unhelpful (people will miss their family and friends etc) yet the idea of being an ex-pat, relocating to a completely different country altogether is seen as exciting and glamorous – what of the friends and family then? I think I saw a Reddit thread asking if anyone relocated up North from London had any regrets and most didn’t.

    Someone in your neighbourhood wouldn’t even have to settle for property in struggle town; the ‘posher’ houses in Nice Northern Town/City would still be deemed affordable, with good schools in the area too.

    With many jobs being hybrid or flexible, now is probably the best time for a young person/couple to consider their options of buying something affordable north of London.

    I wouldn’t describe the place I grew up in as struggle town, no homeless (that I saw) but it was working class, mostly blue-collar workers (although there was high unemployment). I was glad when the family moved to the bright city lights of Manchester during my late teens! The one friend I still keep in touch with who lives in my old home town lives in a world of financial struggle – apart from school, I now have nothing in common with her.

    As for @Ryan’s comment on not commanding stellar salary, he’s right but you don’t need a stellar salary if your costs of living/mortgage etc are much lower.

    • {in·deed·a·bly} 20 April 2022 — Post author

      Thanks weenie. You raise some excellent points.

      I think people can be happy anywhere, as they bring the happy with them or discover it in their immediate surroundings. Any transition involves some dislocation and adjustment, perhaps the move abroad is more exotic or simply more palatable for those left behind than their friend/relative simply no longer wishing to reside within ready visiting distance?

      Someone in your neighbourhood wouldn’t even have to settle for property in struggle town;

      Indeed. My story was exploring the jarring contrast between the cost of housing in the two locales, when the properties themselves and they people seeking to occupy them were essentially interchangeable. If people are people wherever they reside, then the housing price point is simply a matter of choice.

  6. Hague 25 April 2022

    Great post, as always.

    My school friends who stayed continue to live that struggle town existence. No happier or more satisfied with their lot in life than the “everyman”, but certainly financially poorer for it.

    I also grew up in ‘struggle town’ and often ponder the lives of my friends who stayed. Like you I can’t say that they’re any more or less satisfied with their lives than anyone in the, wealthy, high oppportunity, location I find myself in. Indeed, there are times where havng strong family/social bonds counter any financial benefits. My friends are never short of childcare and are able to keep an eye on elderly relatives, etc.

    Also, to echo Ryan and Weenie, there’s definitely a middle ground where decent employment can co-exist with cheaper housing and perhaps maintaining some of those social bonds.

    • {in·deed·a·bly} 25 April 2022 — Post author

      Thanks Hague.

      That’s an interesting observation about the whole village/supportive community aspect of staying versus leaving. I wonder whether that is more a product of time invested, rather than socioeconomic outcome? London is certainly a city of strangers by default, highlighted by the novelty aspect of getting to know our neighbours a little during the pandemic lockdowns. Yet I know several close extended families living in the outer parts of the capital who enjoy the strong support network you describe.

      I think that middle ground is certainly a sweet spot to aim for, providing it doesn’t incur a regular epic relationship destroying road-warrior commute!

      • Hague 26 April 2022

        I wonder whether that is more a product of time invested, rather than socioeconomic outcome?

        Yes I think you’re probably right about time invested. I was mapping my own experiences which is living and raising a family in a more ‘ex-pat’ type community which can be even more transient than parts of London. Social networks do grow slowly. I do see lots of families move (change countries) every few years and even though they’re financially (very) well rewarded it does appear to take some toll.

        It would be interesting to try and put numbers on the difference between ‘struggle town’ and, say, London. For example, suppose houshold net income in ‘struggle town’ is 60,000 versus 90,000 in London which would you pick? I think a Londoner would stay in London while ‘struggle towner’ would (ceteris paribus) likely stay put. But, as you pointed out, geo-arbitrage at particular life stages might be appealing for both.

        • Hague 26 April 2022

          Just to add. The value placed on the social/family bonds probably maps closely to the ‘citizens of somewhere/anywhere’ dichotomy that feeds into the current (neverending!) political debates in the UK, and elsewhere.

        • {in·deed·a·bly} 26 April 2022 — Post author

          It would be interesting to try and put numbers on the difference between ‘struggle town’ and, say, London. For example, suppose houshold net income in ‘struggle town’ is 60,000 versus 90,000 in London which would you pick?

          I suspect it comes down to not what you earn, but what you keep. Feeling flush comes from having money left over after lifestyle costs. Many people would find living in London a struggle due to the living costs, while somebody living comfortably within their means in a lower cost of living locale like the North could feel financial secure enough to be a million miles from struggle town.

What say you?

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