I was giving a talk at a major US investment bank last week.
It’s the fifth time I have been asked in by them to speak on the London property market.
In total there were c. 180 people in the room with apparently another 200 listening in.
There were lots of good questions about yield, stamp duty, interest rates, which areas were likely to outperform and so on. However, there was one question that I have never been asked before at any of the dozens and dozens of talks I have given:
“What is the biggest mistake I have made in property?”
There are in fact two that rank equally high – one is forgivable as I didn’t know better, the other is less forgivable, so let’s start with the latter.
In 2005, I predicted that the market would crash towards the end of 2007 or in 2008. I knew this because I had studied the history of the property market and knew that there was a cycle that repeated like clockwork.
So far, so good. Unfortunately, in 2009/10, I was an idiot and didn’t start buying property aggressively despite the fact that I knew that it was a great time to buy. Why didn’t I take action? Because I started to believe everything that I was reading in the press:
The banks were still highly unstable, global debt had gone through the roof, governments were printing money and just papering over the cracks, the crash needed to be even bigger to wipe out the excesses of the boom, etc, etc.
Despite all the information I had about previous cycles, I allowed myself to be influenced by the tidal wave of negativity that was being spouted by the press and regurgitated by everyone else. In other words, when everyone was fearful, so was I, when in fact I should have been being greedy. When there was “blood on the streets”, I wasn’t buying, I was waiting for it to be safe again.
It genuinely revolts me that I was so dumb. But that is the power of human nature – we are naturally social animals and so tend to conform to popular opinion rather than looking at the facts, which is one of the reasons why we get booms and busts = herd mentality.
Basically, I thought it was going to be different this time. Idiot…
And that is why I write so much about the cycle and how psychology is one of the key factors in making good acquisitions. Now is a classic example. The majority of people are convinced that Brexit, Trump, Corbyn, trade wars, etc. are going to cause a massive disaster for London property and prices globally.
Consequently there are trillions of dollars sitting idle on the side lines. People are scared so money is being held back, i.e. there is huge potential for prices to go up as there is more money in the world than ever before but much is sitting idle (banking regulations are also strict so lending has not got out of hand… yet).
Compare this to 2006/2007 (or any other market peak) when everyone was fully invested and leveraged up to the eyeballs, because the belief was that prices only went up, i.e. it was a safe time to buy! Back then the “music was playing so everyone was dancing”. In other words, all the money was in the market so the only way was down.
This cycle is repeating like all the rest. We will see banking regulations relaxed – this has already started with Trump’s amendments to the Dodd Frank Act last year (which is just the tip of the iceberg) – and then the velocity of money will accelerate as credit increases and confidence returns.
This will cause a massive boom in prices which will be followed by a massive bust. But that crash is years away and prices in my opinion will have doubled between now and then. Just as they doubled between 2000 and 2007 despite the fact that people said that that would be impossible (think dotcom crash, 9/11, recession in the US, etc, etc. – there is almost always a reason to be depressed).
And the other big mistake, I made?
Selling my first property. I didn’t know as much back then and I could have easily remortgaged, taken out a significant sum of money and rented it out while buying another property.
Now, this option isn’t open to everyone and you may want to simply acquire a bigger home. Either way, the key point is that you don’t want to wait until it seems like a safe time to buy. That is invariably a mistake. Buy when everyone else is panicking or waiting like now – but do be selective and ensure that you stick to our best in breed strategy.
And by the way, if you are wondering, yes, I have bought another property in London during this period of negativity. I am not going to look a gift horse in the mouth twice!
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Who am I and why should you listen to me?
My name is Jeremy McGivern. I am the founder of Mercury Homesearch, the internationally renowned property search consultancy, and author of The Insider’s Guide To Acquiring Luxury Property in Prime Central London. I have been acquiring property in prime central London for clients for over 13 years.
Having physically viewed over 22,000 properties in prime central London, studied the details of over 153,400 apartments, houses and investment opportunities and spoken to 232+ estate agents every week for over a decade, my advice is in high demand and has featured everywhere from Bloomberg Television, The Financial Times and The Daily Telegraph to Forbes India and Bahrain Confidential.
Please note that the strategies and techniques revealed in the book and CD’s are not just theory. They have been tested and proven over 13 years of acquiring hundreds of millions of pounds worth of prime London
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