Property markets around the world perform very differently and during short to medium term fluctuations it can be difficult to maintain a long-term focus. If we take the Indian property market as an example, it has been relatively strong over the years but a recent change by the government dramatically hit sentiment overnight. However, with this particular example the Indian economy is set to grow significantly in the years to come, has a massive population and a property market which is focused on a relatively small number of areas. In the long term, this is the kind of market which offers significant growth potential.
Taking advantage of short-term fluctuations
So long as your long-term view on a particular market does not change you should consider taking advantage of short-term fluctuations caused by confusion and concern. This is where buy to let investors, who take a long-term view, often make a killing in the property markets. They choose areas where employment will pick up with the economy, with a significant rental market on their doorstep and growing demand for rental properties. So even if there are some short to medium term fluctuations in asset prices the chances are rental values will be maintained.
It really does come down to the long-term figures with rental yields creating what can be significant income streams. This ongoing income can be used to fund further portfolio expansion or maintained as a war chest to take advantage of volatile markets.
Regular reviews
Your property assets should be reviewed on a regular basis along with the rest of your investments and your own financial situation. There may be opportunities to increase your rental income, bank a profit or start to build up exposure in undervalued markets. You should obviously keep an eye on your investment on a regular basis throughout the year but at the end of each year you should do a full scale review.
Many people in the UK view their property assets as their long-term pension funds and therefore it is likely investment strategies will change as they approach retirement. When you are relatively young you can take some chances with more speculative investments using part of your funds but when you get a little older it is then that perhaps more security is required. That is not to say you should cash in everything as you approach retirement but maybe increase your cash element to fund your post retirement lifestyle.
Adapting to markets
As long as your long-term view on a particular market does not change then short-term fluctuations can offer an opportunity to increase your exposure. There will also be times when you need to adapt to changing markets where perhaps your long-term view does start to change or you believe there is better value elsewhere. Just because property is seen as a long-term investment does not mean you cannot sell and switch to other markets. True, it may take longer to dispose of your assets due to regulations and paperwork but do not let this put you off.
If we look at UK markets for example, there is doom and gloom surrounding London while Scotland is struggling as the politicians continue to fight amongst themselves regarding a second independence referendum. It is easy to get pulled in by short term issues and perhaps ignore the long-term potential. This investor’s mind-set looks easy on paper but putting it into practice can be a challenge.