Negotiation, Negotiation, Negotiation

UK Property Investment news and comments from Mark Harrison of YourPropertyExpert.com

Estate Agents have 9% more stock on their books than last month

Posted by markharrison on November 17, 2007

According to the recent RICS figures, UK estate agents had 9% more property available to sell in October than in September. (That’s “leading” in the sense of something that happens BEFORE, ie “lead” as opposite to “following” or “trailing”… not leading in the sense of “important”.)

This is, I believe, excellent news for property investors, not least because it’s seen as another “leading indicator” that prices will go down.

It’s a common, naive, belief, that we make money when the market is going up… but here’s the question (one originally posed by Warren Buffet about shares many years ago):

If you are intending to purchase more of something over the next few years, should you hope the prices will go up or down?

In property, market isn’t particularly liquid, fungible or transparent (terms I explain in my YourPropertyExpert.com post here)… so a declining market gives even MORE opportunities for picking up bargains than a stock market does.

The key reason why is buried in that phrase “seen as a leading indicator”… or more specifically “seen as”. That is to say, some vendors will look at such statistics and say “the market is going to crash”. Those are the vendors who then predispose themselves to sell out for less, quickly, in order to avoid the crash.

Of course, if a crash really happens, things could get hairy, so keeping positive cashflow is going to become even more critical, to avoid being pushed into reposession or even foreclosure.

Interesting times ahead, and not one in which the strategies that worked in the 1990s will carry on working.

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