Time To Buy?

One investment theory goes that when everybody is at their most optimistic this is the time to sell and when they are most pessimistic, this is exactly the very time for investors to pile in. We have seen this theory play out several times over the last decade.

Firstly, who remembers the tech bubble of the late 90s? According to the pundits & analysts the world was all going digital. Property was a thing of the past in this new digital age and values slumped. We were all going to sit next to our computers pressing buttons to buy all our worldly needs and shops, bars, traditional high streets, offices retailers some how belonged to the dark ages. The tech bubble burst, the pundits changed their mind when they realised that actually people quite like moving away from their computers to socialise, eat drink and go shopping. To finance all this they needed to work in offices, factories all housed in traditional brick and mortar. All this meant that property was not dead but actually massively in demand.

Then the pundits said that property was the thing. You can’t go wrong with property, “bricks and mortar” “safe as houses” “property pensions” “a one way street”. We all know to well what is happening with the property boom.

Even today I hear that OPEC is to cut production because of plunging oil prices which are expected to go below $100 a barrel. Only a few months ago experts were predicting that prices would keep rising at their phenomenal growth rates past $200….300 even $500 a barrel some were suggesting.

Who do you believe?

The Internet is a wonderful thing. It bring us information tons of it; stats, graphs, news views, blogs, forums….the back ground noise from all this chatter is sometimes deafening which is not always that helpful or instructive.

Perspective

I have just returned from one of several holidays to Italy this year. The contrast to our constant obsession with activity, change, new the latest, momentum could not be greater. When you inhabit cities constructed by the Romans, new has no meaning. Italians sip coffee, drink great wine, eat the world’s best ice cream and look great just as they have done for hundreds of years; unmoved and unimpressed by modern trends. Anybody who has ever tried to find a WIFI point in an Italian city will know this! This is good, it gives you chance to reflect, block out the chatter, sort out the wood from the trees and get a sense of perspective.

So should I be investing in residential property?

There are no doubt some great opportunities out there. Have a look at my recent post about the property repossessions coming to auction at the forthcoming Allsop sale

The RICS reported this week states that the average estate agent was selling just one house per week, the lowest since records began in 1978. Some agents were reported to be going to desperate lengths to sell properties including offering advice to potential purchasers along the lines of “make any offer – they’ll accept anything”. Clearly this is an environment where aggressive landlords could steal a bargain property from motivated sellers.

Get on with it you old fool, I can hear you cry! Answer the question!

Well I’ll answer the question with my own set of questions. How pessimistic do you feel? Have you heard of a friend losing their job, are you worried about yours? Do you know people in mortgage difficulties or arrears? If not do you still therefore feel optimistic about residential investment property and think that there is lots of money to be made? Then maybe the point to buy has not been reached.

What am I doing?

Luckily I sold some of my residential investment portfolio in 2004/2005 and I continue to build a cash pile by selective remortgaging.

At the moment I can see real opportunities in shares in bombed out commercial property company shares. Have a look at the Income Monkeys latest tips.

I expect some of these property shares could rise 50-100% over the next 18 months as markets stabilise and lending and confidence returns. Then, I will wait patiently for all the pundits to tell me not to buy and why I shouldn’t invest in residential property. Then I’ll buy.

HAWKEYE – a unique perspective on property investing

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