In 2003, Roger Bootle who was formerly chief economist of HSBC and one of the Bank of England’s ‘wise men’ said, “House prices will fall by 30% in the next four years”.
As you may remember house prices doubled in many parts of the country during those four years. And yet, unfortunately, many people listened to his advice because he was supposed to have a better understanding of economics than anyone else and access to better data being one of the Bank of England’s “wise men”.
I mention this because in times of obvious uncertainty people want to avoid making an expensive mistake and looking stupid or naïve. Consequently, negative predictions are deemed to be more intelligent than optimistic forecasts, even though the pessimists are normally wrong hence the old joke about economists predicting 20 of the last two recessions.
The negative opinion is also given greater credibility because as it is likely to be the consensus opinion of the time, it is safe to follow it. After all you will look less stupid and be less embarrassed if everyone else is in the same boat. Ironically, the same is true during the final crack up boom phase when anyone with a negative opinion is lampooned for being too conservative.
This is another reason why most economists make similar predictions and fund managers invest in similar stocks - You are not going to get sacked if everyone else is wrong too. However, the personal risk is much higher when they go against the consensus view which is why they don’t. As you will almost certainly be sacked if you are wrong over a one or, heaven forbid, two year period.
One person who noticeably goes against consensus opinion is Warren Buffett. In the run up to the dotcom crash Warren Buffett was widely derided for eschewing tech stocks as he didn’t understand how AOL, Pets.com and other dotcom darlings made any money. He was regarded as “past it” and “too old” to understand…
He seemed to outperform somewhat during the early 2000’s if my memory is correct and was in a reasonably strong financial position in 2008/9/10 and was buying when everyone else was predicting the end of western civilisation…
Interestingly, Berkshire Hathaway Real estate has recently opened a franchise in London just as transaction levels are at all-time lows and the consensus is that London is doomed and tumbleweed will soon be rolling through the streets.
Now, you may be reading this thinking “I am not Warren Buffett and this time it really is risky to buy in London”, but history has proven that the best times to buy in London were when it seemed very risky:
1. 1950’s = the collapse of the British Empire – a slightly bigger issue than Brexit
2. 1970’s – The UK as the “sick man of Europe”
3. 1992 – the UK is thrown out of the European exchange Rate mechanism
4. 2000-2002 – Dotcom crash, 9/11 and the terrorist attacks in London plus a recession in the U.S.
By the way, everyone told me I was mad for opening a property consultancy in 2001 as prices were too high and about to crash. Indeed, it is only at the end of the cycle when everything seems “safe” and prices are going up 25%+ per annum like 2006 and 2007 (or 1988/1989 in the previous cycle), that people will tell you that you should buy property… just before the massive crash!
Right now, we are nowhere near that stage of over optimism when Buffett says you should “Be fearful when others are greedy.”
So rather than being swept away by popular opinion which ignores the underlying facts in favour of lurid and misleading headlines, you might want to dig beneath the headlines and consider what is actually happening:
1. According to Wealth X, the world’s ultra wealthy population, or those with $30m or more in net worth, expanded strongly to 255,810 individuals.
2. The combined net worth of the ultra high net worth (UHNW) population increased by 16.3% to $31.5trn in 2017 (2018 figures are not available yet).
3. The global UHNW population is forecast to rise to 360,390 people by 2022, an increase of almost 105,00 compared with 2017. The level of UHNW wealth is projected to increase to $44.3trn, implying an additional $12.8trn of newly created wealth over the next five years.
4. So, the number of UHNWI’s who historically have been exactly the type of people to buy in prime central London has increased significantly (as has the number of HNW individuals, i.e. those with $5m-$30m) and their wealth is increasing at a significant rate.
What affect do you think this will have on London property?
Meanwhile, the “smart” money has been investing heavily in commercial property as they believe that London will continue to be, as one of my German clients put it, “a major global hub” - in the first half of 2018 international investors spent more on commercial property in London than in Frankfurt, Munich, Paris and Manhattan combined. (Source – Savills).
Is it unreasonable to suggest that residential property will follow suit especially as prices have fallen significantly for international buyers?
Of course, anyone can follow the crowd, but if you want to get ahead of the masses and achieve better results, then you need to do the opposite to them and be greedy while others are fearful. This is the chance. Most won’t seize this opportunity, but you can.
However, you need to be selective, so if you want to find the best homes or investment opportunities you can discover the strategies and tactics I have been using for over 18 years to acquire properties for the members of Mercury Homesearch by requesting a free copy of my book, The Insider’s Guide To Acquiring Luxury Property in London.
Simply leave your details in the box to the right (or at the top of this page). Alternatively, you can email firstname.lastname@example.org or call 08003894280 (+448003894280 from outside the UK).
Good luck with your search for a property in London and please take action sooner rather than later.
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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
property for my clients, who include some of the world’s wealthiest families and most successful entrepreneurs and business people - it may surprise you but over 30% of our clients are British and based in London so this information is relevant whether you have bought a property in London before or not.
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