Singing Pig

Hi All,

I'm new to SP so thought I would write some thougths on the current state of the market that others might find useful/thought-provoking ... 

 If all the doom and gloom in the media is to be believed, it would seem that we have entered into official bear markets territory in property. (Bear markets are defined as a drop of 20% or more from a previous high. Some desperate vendors are dropping more than this to achieve a sale!)

This is a good thing. Legendary investors understand this. Ordinary investors don't.

I believe it’s time to get very excited about creating some serious wealth in property.

Professional investors think like a chess player i.e a few moves ahead.

Every investor knows that, as a general rule in investing, you're supposed to buy low and sell high. Bull markets give you a chance to sell high. Bear markets give you a chance to buy low.

If you want to prosper during the next bull market - the one that will propel the averages to new highs in the years ahead - now is your chance to pick up some bargains…

Don't Let Bear Markets Scare You

Unfortunately, too many investors are lulled into complacency during bull markets and scared out of their wits in bear markets. So they do just the opposite, buying high and selling low ... or they freeze and don’t do anything.

Yes, the property market has fallen sharply over the past nine months. And it may fall further in the months ahead. Still, this is an enormous opportunity for long-term investors. It’s a shame a lot of them don't see it that way.

Bear Market Stocks Return 5.6% Annually

For example in stocks, in the last long bear market, 1969 to 1982, stocks returned just 5.6% annually. But that mauling set us up for an 18-year bull market where stocks compounded at 18.5% a year, enough to turn £10,000 into more than £200,000.

In the last so called U.K. “property crash” of the late eighties and early nineties, property devalued by an average of 18%. Yet property recovered from that and returned to achieving an average of 11.8% growth per annum. This is what it has done on average since the end of World War II.

It’s worth noting: no one when can tell you when the next bull market will begin, how long it will last, or how high the market will ultimately go.

But, as you have probably heard throughout your entire life, the shortest route to financial freedom is to own a business. And it is safer to own a portfolio of businesses than a single one to ensure you have multiple income streams. Hence, every long-term investor needs exposure to different types of investments. When do you get to buy them cheap? During a bear market.

So, if you are not currently investing in property, now could be one of the best times in recent memory to get involved! If you are investing, now is a great time to expand and diversify your portfolio significantly. For instance, as we predicted at our networking event in April, more and more investors are turning to holiday lets to increase their cash flow.

Like any market, property is cyclical. We’ve seen this happen before, and the market has always recovered and gone on to new highs. What we’re seeing happen now is nothing new.

Legendary American investor John Templeton, who sadly died last month, often said the four most expensive words in the English language are "THIS TIME IT'S DIFFERENT." He also said the best bargains are found at the point of "maximum pessimism." You don't get maximum pessimism during bull markets. You get them during bear markets when everyone is saying that the world is falling apart.

Times like now, for instance. Act accordingly!.

You are completely right to say that markets bottom at maximum pessimism, but we are not there yet. For the market to stop falling, we need a capitulation – we need volumes of distressed sellers and that is still a long way off. The base rate cut and the ones to come may slow the fall but it won’t stop it. The market will bottom at some point in the next 5 years, but it will feel like that property is the worst investment in the world – not just for now but for always, and almost everyone will be saying that. It is then, not now, that the market will stop falling and that will be the mother of all buying opportunities. The problem is that banks will also think that property investing is a bad idea so may not be willing to lend much (like they thought that property could never go down in price during the boom). Having said that though, it is difficult to see how getting a mortgage could be more difficult than now.