“The property market follows a cyclical pattern of boom and bust periods, and there is inevitability as to what will happen next. While there is a large amount of money to be made in the boom periods; the house prices are much higher because the demand for property during the boom periods is much greater. Many buyers seem to shy away from property investment during recession periods when in fact there are many opportunities available to them. Investors look at property differently to other investments. When it comes to buying shares on the stock market for example, how many investors would want to buy stock when prices are high and sell when prices are low? Yet this is exactly how they look at property,” says Gilmour.
He adds that the current economic market is slightly more unique than what has been experienced in recent times and is perhaps the only other time in history that market conditions can be compared to the great depression. However, he says that although the predicament may be similar, there is more opportunity in terms of development and the number of properties available to buyers in our current market.
“The opportunities that investors take advantage of now will benefit them during the next boom period, much like during the great depression and time the followed, which was 75 years of straight real estate appreciation in the U S. Those investors who had the foresight to buy property while the market was still recovering saw good return on their investment once the market had reached the point of full recovery and was flourishing. While shares in companies and products will go in and out of style, property investment will remain a sound option over the long term,” says Gilmour.
While the last boom period was largely based on buyers taking out credit they couldn’t afford and living above their means, the recession forced many consumers to tighten their belts and decrease their debt-to-income ratio, which is very positive for the economy in the future. With less debt, more and more buyers have been able to put down larger cash deposits required by the banks when purchasing property. As more buyers show affordability within the stricter lending criteria, the emerging property market will have a stronger foundation. With the correct lending policies in place and consumers living within their means, the property market can once again begin to grow and thrive much like it did after the depression.
“With the certainty that a boom period always follows a bust, investors can enter the market with confidence and take the opportunities that are presenting themselves. The fact that we have experienced a recession is in itself an opportunity to build wealth. The correction of the market has meant that many properties that were previously not within the financial reach of buyers are now available at lower prices. The secret to building wealth through real estate is no secret at all. See property as a long term investment, if possible hang onto property or buy during the lows and sell during the highs,” concludes Gilmour.