Manage The Information And Influences You Have
Manage The information And Influences You Have
What do I mean by this?
Especially in a market downturn the media will really make a big thing out of any negative information without often fully understanding it or analysing it – as long as it gives them a powerful headline!
The price is going to be far lower than 12 months ago – this is obvious and makes perfect sense but should not scare anyone.
With current borrowing rates dropping even further there are likely to be less distressed sellers over the next 12 months – I know many people who were stretched significantly who now are in a far better cashflow situation due to mortgage rates halving.
The most important thing here however is that as soon as credit improves – not back to what it was at in 2007, but to a more sensible level than now, the average price of the transactions will rise so in theory the headlines will say property values are rising…! The values will not necessarily be rising, there will just be far more people looking to buy and not the level of discounts that can be had now.
So rather than being a negative headline, I actually take the headlines just now as very positive. Even with a lack of credit and all the negative headlines, and most sellers being forced to take very low offers – the overall transaction price is only 16% less than last year – so the property market, which as a whole was overvalued by around 10% anyway has seen nothing like the levels of drops the stock market has had – and is in a far stronger position to bounce back quickly as soon as credit improves. I have seen some commentators predict another 15% fall this in year – unless credit worsens further, and all the signs are it is improving, at the buy ticket end – we had 20 completions in Dec 08, more than in Dec 07, this simply won’t happen.
I predict in many markets where prices have only gone down marginally eg Scotland, 2%, Hartlepool 4%, prices will stay around the same, and in fact nationwide I cannot see the average transaction value changing much from the £159,000 that is currently at.
I wrote last May before the majority of the credit issues that the affordable level for UK property prices based on salaries was around £150,000 – although I still prefer markets at under £90,000 – and I think it will be good for the economy going forward if we get to around that.
It always worries me how many people are influenced by sensationalised journalism for their financial information! Hopefully this example helps explain why.
With any property market walking the streets, speaking to locals, getting a feel for local supply and demand and rental figures will make the difference to you and how well your property investments perform.
Anyone relying on the Daily Mail for their financial news and property advice is less likely to do well and more likely to follow the herd mentality which sadly will never give strong results.
Sure read the headlines, and the stories but take pride in the fact you understand the numbers, and your market, and what makes a good investment, and what doesn’t.
Buy when others aren’t and negotiate the kind of discounts which we are seeing just now, which will give significant financial security within 3-4 years time.
Alan Forsyth runs the two websites at www.property-investment-tips.com and www.property-investment-deals.com and send s out weekly newsletters to over 8000 subscribers – sign up for free at both sites! He also writes for several property magazines and gives free consultations to investors – for more information, email info@property-investment-deals.com or call 0115 9474155.
