The secret for investing in property in any market condition

Brett Alegre-Wood
June 2, 2017

Whatever the market trend, you can profit from property

Investing in property is something you are considering. Otherwise, you wouldn’t be reading this article. What’s stopping you? Are you one of the many would-be investors waiting for the ‘perfect market’ to invest? If you are, I’m afraid you’ll be waiting a long time. Meanwhile, you’ll watch others invest in property and make the money you should be making.

In this article, you’ll discover how to invest in property successfully throughout the entire property and economic trend cycle. You’ll soon be investing confidently, negotiating the best prices, and reaping the highest rewards.

What are the property and economic trend cycle?

All markets and economies tend to work in cycles. You may have heard of the ‘boom and bust’ economy. That’s simply a sensationalist way of describing how an economy grows, slips back, and grows again.

Property markets work in a similar way. They rise, level out, fall, plateau, and rise again. Beginner investors hesitate because they fear to buy at the wrong time. In truth, there is never a wrong time to invest in property. The secret is to know how to invest in any market condition. If you can identify where the market is on its trend cycle, you can adapt your property investment strategy accordingly.

One of the many benefits of investing in property is that property markets tend not to rise and fall as rapidly as stock markets. Stock markets crash and huge sums of money can be lost in just a few months. The UK property market has been far more stable. Consider this:

  • In the last two stock market crashes (2000-2003 and 2007-2009), UK stock markets lost between 40% and 50% of their value. Since January 2000, the UK stock market (FTSE 100) has increased in value by around 8.6%.
  • Meanwhile, house prices fell by around 18% between 2007 and 2009. Since January 2000, the average house price in the UK has increased by around 181% (Nationwide House Price Index).

If you’d have had the courage to invest in property in early 2009 when all others were selling, you could have negotiated a tremendous discount. You would now be sitting on a very tidy capital gain, as well as benefiting from a fantastic income yield on your investment.

Speculation vs investment

In my experience, it is long-term investors who have made the most money from property investment. Those who buy for short-term gain in strong markets (‘flipping’ – buying and selling quickly) are at the mercy of the market. It is the market that controls their profitability, not themselves.

When you invest for the long term, you’ll be using strategies to limit risk and adapting your investment strategy through the property and economic trend cycle. You become a master of your destiny.

Why you need to adapt investment strategy for different markets

There is no such thing as the perfect market conditions for investment. In rising markets, you’ll find it more difficult to negotiate a discount on the attractive property. So, your entry cost is higher, and your profit potential could be limited by this. However, if you need to sell the property, a rising market gives you the best opportunity to do so at a good price.

In a falling market, it is easier to negotiate a bargain. But it is more difficult to sell, and if prices continue to fall the bargain you bought may not appear such a good deal after all.

To invest at the right price in all markets, you need to be able to assess real value. This value may be in the rental income the property could achieve, or the sale price when you expect to sell.

How to limit risk when investing in property

The best strategy to limit the property investment risk is to get investment education. Learn how the property fundamentals (shops, schools, transport links, major employers and major investment) affect demand and property prices.

Partner with property experts to guide your investment decisions. These experts will help you to decipher all the economic indicators and local factors that affect values and rental demand. With this knowledge under your belt, you’ll make better investment decisions.

Think about the demand for homes

No matter what the economic conditions, people need somewhere to live. Here in the UK, the number of homes built has lagged demand for years. It is likely to continue to do so. The number of households that are renting is also rising rapidly.

Currently, there are around 5.3 million households in private rented accommodation in the UK. PwC has forecast that this number will rise to around 7.4 million by 2025. That kind of growth underpins rental income and rising property prices.

Of course, demand for homes is not evenly spread across the UK, which is why you need to do your research and due diligence to find the best places to invest in property UK.

How to invest in falling markets

Whether markets are rising or falling, investing with strong property fundamentals is likely to guarantee the best returns. However, falling markets offer some incredible property investment opportunities which you simply won’t find in rising markets.

Sellers become eager to sell when prices are falling. As a buyer, you can take advantage of this desperation, negotiating a price well below the real value. While this bargain basement price is great news for long-term investors, a flipper could easily lose money. Flippers need to sell quickly to lock in their profit. Long-term buy-to-let investors aren’t interested in selling quickly and have the rental income to pay mortgage costs, as well as the benefit from the discount from market value.

What are the signs of a change in market trend?

Markets change, but how do you know they are about to change? Most signs come from national events. For example, a rapid slowdown in economic growth, higher inflation, a quickfire increase in interest rates or tax changes can all be indicators of a changing property investment environment.

But property markets aren’t national beasts. Local issues are the most important factors to consider when examining property trends. For example, unemployment, an oversupply of housing or infrastructure build are all factors that dictate local property market trends.

Always have an investment and exit strategy

When you invest in property, have a clearly defined investment strategy. Know what you want to achieve, and plan to achieve it. Savvy investors have exit strategies planned before they buy property. They may never sell, but they have a backup plan if things go wrong, or personal circumstances dictate a sale is necessary.

Don’t wait for the perfect market, develop the perfect strategy

You can invest in property successfully through all market conditions. You don’t need complex investment strategies to do so. The most successful property investors use no more than a few basic investment strategies, remain active throughout the property and economic trend cycle, and know their exit before they invest.

If you’d like to join these investors, contact one of our team today on +44 (0)207 923 6100. If you continue to wait for the perfect market and perfect property to come along, you’ll be waiting a very, very long time.

Live with passion

Brett Alegre-Wood


Investing in Property

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