Property has become a staple part of many people’s investment strategy but it wasn’t always that way. I was playing golf with a friend recently, a currency trader. He pointed out that the golf club he was hosting at used to have a ‘Shares Club’ where people would exchange perspective on which shares were hot and those that were not.
He then went on to point out that these same people are now property investors and that discussions nowadays are around the next place to buy a house – an interesting shift. His slight concern or question posed was whether property had maxed out and if these groups might suffer a similar fate as their caring, sharing predecessors…
I remember having a similar chat five years ago, just before the latest surge in property prices. I also remember having the same chat in the early 2000’s and adjusting, my then small portfolio, to be less aggressively leveraged. This was subsequently followed by the biggest price hike in recent history! AND I remember having the same discussion in the early 1990’s when interest rates were spiraling out of control. Once again, this was followed by a massive surge in property investing, due to the capital and rental yield returns that followed.
My point is that there always is, and will always be, this same speculation and it won’t ever change many peoples’ actions as to what is best to do next. And that macros are cyclical.
I would make two observations here:-
- Firstly, no-one gets in at the bottom
- Secondly, no-one gets out at the top.
The smart guys look at trends and take the long-term view, often ‘pound cost averaging’ an investment strategy to ensure against any adjustments in the market.
A coaching question I recently asked a friend who is starting out on their property investing journey was “How do you currently see the property investment fundamentals?”
His observations were:-
- “Interest rates are low”
- “Demand for rental property is high”
- “Property is in short supply”
My next question was naturally, “So what are your predictions for property prices, given those conditions?”. I chose not to ask any other questions and I absolutely wasn’t steering him in any way, but the penny had dropped for me (and him!). My shift was to start ignoring articles that didn’t make sense and also not to automatically go along with ‘popular thinking’. His shift, as he later shared, was one towards thinking with clarity and not with fear or misaligned, irrelevant and short-term data.
My message is simple. Do not let FEAR dictate what you do next. Observe clearly what is in front of you and ‘Back Yourself’: trust in what it is you feel is the right thing to do. If fear is in control of your next move, you are already in a weak position. Just like in sport. Thinking clearly and making good decisions are just some of the behavioural characteristics of successful property investors.
Steve Backley OBE is co-founder of Perform in Property professional property training, together with fellow GB Olympian Roger Black MBE and industry leaders, Legacy Education Alliance, Inc.
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