There are very few, if any, investment markets around the world which do not repeat themselves over time. While it is therefore possible to learn from historic movements in property prices they should be taken as an indication only because no one situation is ever exactly the same. There are a number of factors which you should be aware of and which have a material impact upon worldwide real estate markets.
It goes without saying that worldwide property markets are heavily impacted by the local and the worldwide economic climate. Indeed during the 2008 downturn we saw a massive correction in many property markets around the world and while the likes of London have fought back to pre-crash levels many markets have not performed as well. Economies themselves are very cyclical as well with boom and bust scenarios, something which Gordon Brown promised to beat, happening with regular occurrence.
Therefore, if you’re able to see patterns in economic performance, both on a local and worldwide scale, this may well help you to predict the short to medium term direction of property prices.
Human nature in the investment arena is a very powerful tool and it can push markets to levels where there seems to be incredible value or push prices away and beyond sensible valuations. There are number of reasons why human nature is so powerful much of which is to do with the “pack culture” where sellers follow each other as do buyers. So, when markets are either turning upwards or downwards there can be a very sudden movement in the early days of this change in the cycle.
If we could sum up the power of human nature in the investment arena it would be “fear and greed”.
Media coverage can significantly magnify the views and opinions of a limited number of so-called “experts” with their expectations for property prices very quickly becoming self-fulfilling prophecies. The media is an extremely powerful element of all investment markets because quite literally this dictates sentiment in the short to medium term. A change in sentiment can very quickly cause a significant reaction amongst investors leading to, as we suggested above, a self-fulfilling prophecy.
It would be foolish to ignore media coverage on the worldwide and local property markets but you do need to do your own research to ensure you’re making the right decision. Indeed there are occasions where doom and gloom headlines in the worldwide media could create a short-term buying opportunity for assets which have long-term potential. If you look back at how media coverage has impacted investment market cycles in years gone by you will be very surprised but this will also give you some food for thought going forward.
There are many different elements to the worldwide real estate market which include economies, human nature, media coverage as well as global trends. It is nigh on impossible to predict with any real confidence what property prices will do in the short to medium term but sometimes a look back at similar bouts of market performance can give you an idea of the major influences.