In today’s uncertain times, the gut reaction for most investors is to sell up and sit on cash, because it is ‘safe’. Guess what? That is a bad idea and that’s why you don’t see property professionals selling up during times of uncertainty.
There is no doubt about it, we are going to go into an economic slowdown. What that is called is largely semantics. In contrast to recent economic slowdowns driven by demand shortfalls, coronavirus will cause a supply-side shock to the economy as well – as literally billions of people cannot go to work and global supply chains break down. Central governments will have little option but to engage in massive deficit spending to prop up their economies. One of the outcomes of this breakdown of global supply chains will be sharp declines in production and supply bottlenecks – this may well create significant inflation.
Property Professionals – what’s their view?
“Opportunity from crisis” seems to be the only way to describe the aftermath of coronavirus. For property investors, the coming period is likely to provide a significant opportunity to build a residential property portfolio; particularly in the new build market, for the following reasons:
- Interest rates will remain low (governments will be under pressure from massive debt increases). Find out the current Bank of England base rate here.
- More people will rent as they struggle to recover financially from the impact to their personal finances
- Governments may offer incentives to stimulate housing construction (a great way to stimulate employment)
- Owner occupiers will be less willing and able to purchase homes and mortgage debt will be more difficult to obtain
- Developers will be far more willing to trade with retail investors than institutions (who typically look for greater discounts)
- Supply of new housing will be hampered as building work will take some time to restart, which will put further pressure on property values – particularly as the market recovers
For the reasons above, for small investors, you are likely to be in a unique position where, if you can buy, there will be significant upside. And, for the first time in many years, investors are likely to be welcomed with open arms by governments who will see the benefit that investors can bring by stimulating housing markets and creating jobs through new construction!
As I sit in my home on lockdown, I have a bit of time on my hands! So, I have decided to get on with something I have always wanted to do, which is write a book about investing in new build property. Each week I am going to write a new chapter and will blog a summary of its key themes and ideas. My hope is that by reading my blog you will build a solid understanding of the new build development and sales market so that you’re in a position to invest with knowledge; not only to build your own financial security but also to help drive the financial recovery and put people in homes.
To keep you interested, my final two blogs will be about how the costs work in the industry and how you can use this to your advantage when negotiating to buy a property. And give you some strategies to buy from someone with genuine market knowledge.
Why am I qualified to give you this advice? In my professional career, I have developed and built one of Asia’s largest off plan property sales businesses. Within that business (which I led), I have been directly involved in:
- Developing pricing models for new build developments and wrote the standards for the business
- Working with many of the world’s largest developers ‘go to market’ strategies
- Overseeing global sales and marketing strategies for projects from Australia, New Zealand, United Kingdom and North America
Over that time, I have also established my own investment portfolio in my hometown Adelaide, Australia. And seen some investors make some very poor decision and others do exceptionally well.