Over the last two years the UK property market has been one of the best performers in Europe and more than held its own in the worldwide real estate sector. Even though the UK economy is starting to pick up pace, with the recovery now in full swing, many experts believe that the price of UK property has outpaced the recovery in the economy and is starting to look a little top-heavy. That is not to say that the UK property market is significantly overvalued but is it time to consider reducing your UK property investments?
Despite the fact that all of the recent news regarding the economy and the UK property market has been positive, and experts seem to be pushing for further growth in 2014, would you feel comfortable buying UK property today?
Reviewing your UK property assets
If we asking a simple question, would you buy the properties that you hold at the moment if they were on the market today at the going rate? This is something which many stocks and shares investors will ask themselves on a regular basis, are the shares that you hold at the moment offering good value, i.e. would you buy them today?
Quote from PropertyForum.com : “We all know that the UK property market is dependent on London but did you know that 25% of UK mortgages are connected with the London property market? Is this too much? Then again the London property market seems to attract massive overseas investment – does this help the wider UK property market?”
If you question the value of your UK property assets at current prices then it may be time to review your portfolio with a view to reducing your UK exposure. Even though you may not be comfortable buying UK property at this moment that is not necessarily a sign to sell all of your assets just an indication that perhaps you are not as comfortable with the market as many so-called “experts” seem to be. The reality is that reducing your exposure today may seem a little premature but, as we have seen in years gone by, once the market turns it can be difficult to cash in your assets before the scramble for the exit door.
As Lord Rothschild once said……
As Lord Rothschild once said, the reason I’m so rich is because I always sold too early!
This may seem like a rather strange comment but if you sit back, consider the content and the relevance to any investment market, it does make sense. If we take the Dubai property market as an example of over exuberance, which eventually led to a collapse in real estate prices, this perfectly illustrates the strategy of reducing your exposure on the upside. The reality for many people is that once the market does turn everybody will be scrambling for the extra door, prices will potentially dip sharply even though the long-term situation for the UK property market may still be moderately positive.
We could very quickly go from a potentially overbought position to a potentially oversold position because, as we all know, human emotion often takes over at the extreme ends of any investment cycle. Whether or not it is time for you to reduce your UK assets, possibly bank some profits in the short term and either sit on the sidelines or look elsewhere, is a decision which only you can make. There may be an extra 5% to 10% left in the UK property market but what will happen once the market peaks and active investors look to reduce their exposure as quickly as possible?