Amid economic concerns in various countries around the world, a worsening immigration crisis and weak stock markets it is no wonder that some property investors are becoming concerned. While it would be misleading to suggest that the current economic crisis has “come from nowhere” it would be correct to suggest it has perhaps snowballed and moved more quickly than many had expected. The situation in China is, in the eyes of some experts, beginning to stabilise but the expected knock-on effect to the worldwide economy has yet to be quantified.
However, does this change the medium to long term picture of the worldwide real estate market?
Value investors
There are many different types of real estate investor, some looking for short-term profits and others more interested in building up a long-term portfolio. History shows that successful real estate investors take a long-term view on their assets and will indeed look to pick up further investments on short-term setbacks as well as reducing their exposure in overly buoyant markets. However, many successful property market investors like to retain a long-term core of assets which offer a very useful backbone going forward.
While we cannot emphasise how important it is to take a long-term view with property investment, there is certainly nothing wrong in taking a profit in the short term if it is there.
Do not overreact to short-term situations
Over the years we have seen hundreds of situations where short-term issues have often clouded the minds of investors in the real estate market. Those with a clear focus, and able to lock their money away for the long term, tend to find it easier to ride the waves of short-term fluctuations. The fact is that say a market was to fall by 10%, is there a greater risk in selling at the first sign of trouble and then buying back later on?
In reality it is unlikely you will sell just before the market falls and unlikely you will buy just before the market turns upwards again; therefore when you take into account the cost, time and effort, is it perhaps easier to hold the assets with a long-term view? That is obviously assuming that they still offer good value going forwards and, if you are looking at the buy to let market, the rental yield is still attractive?
People will always need homes
While there are obvious fluctuations and differences in real estate markets around the world the simple fact is that the worldwide population is growing and the number of homes available is not growing at the same pace. Therefore, while there is increasing demand for existing properties many politicians will wax lyrical about increasing the number of “newbuilds”. However, this takes time, money and effort, something not all politicians have in abundance. They will talk the talk, they will grab the headlines but how often do they fail to walk the walk?
Conclusion
It is worth reiterating that the worldwide real estate market should be deemed as a long-term investment as opposed to gambling on short-term fluctuations. There is nothing wrong in taking a short-term profit, as and when it is available, but if you go in with a long-term view and finances which will allow you to avoid financial panic then you have the best opportunity of a long-term return on your investments. It may be difficult to ride the short-term fluctuations, it can be distressing, that feeling of missing out on a falling or a rising market, but as history shows, the more successful real estate investors take a long-term view on their property portfolios.