We all have our favourite property websites, news channels and experts that we follow but who do you believe about the state of the UK property market? We can guarantee that on any given day you can enter the search term “UK property” into Google News and you will be hit with a raft of contradictory headlines. Some will suggest the UK market is booming, others that confidence is waning with some taking a more balanced and non-judgemental approach. So, how do you arrive at your own opinion about the state of the UK property market?
Whether we like it or not the mass media has an enormous influence not only on investment markets but everyday life. One headline going against the trend can have a major impact upon investor sentiment and it just takes the slightest doubt in the mind of an investor to potentially change everything. It would be wrong to suggest that property investors should ignore the mass media because not all of the content you read is biased. However, you should not take too much notice of one article in isolation.
Facts and figures
As we covered in one of our recent articles, the cold hard facts and figures of any investment give you an indication of the “fair value” although this can vary widely from the “market value”. However, the fair value of a property asset using the yield, the price of similar assets in the region and other factors will give you an idea on which to base your opinion.
This fairly simple action will give you an idea of whether current investor sentiment is pushing the value of a property above/below its fair value. Using this comparison it is possible to trade on sentiment margin whether buying property which is depressed, and priced under the fair value, or selling property which has got ahead of its underlying value. However, you also need to take into account the local, national and international economy.
You may be investing in the right type of property, in the right area at the right time but if the worldwide economy is struggling then you will be fighting a losing battle. We saw this in the aftermath of the 2008 US mortgage crisis which shook investor confidence, brought financial markets to a standstill and forced governments to inject billions upon billions of dollars to keep the wheels of commerce moving.
The property market and other investment markets attract a whole host of different views and opinions each day. Some will suggest that economies are depressed, some may look to the future with more hope and again some will take a more balanced non-judgemental approach. Against this background it can be difficult to see the bigger picture but again if you look at the cold hard facts, get an idea of investor sentiment from the headlines then you can extrapolate this to forecast how property markets might perform.
At the end of the day you are investing in the market, it is your decision, it is your money and it is your responsibility. You must therefore arrive at your own decision while taking into account the opinions and views of others together with the cold hard facts. As you become more experienced in property investment you will also be able to rely more heavily on “gut feeling” which is something that should not be underestimated.