A Suggestion For Fearful Times
Any one with a calculator, a history book and a graph showing population trends, can make a strong argument to support the view that property (or real estate) is a powerful long-term wealth builder.
But we humans don't naturally base our most important decisions on history or arithmetic. We're more likely to be influenced by a host of other factors including fashion, feelings, friends and family, short-sightedness, and immediate pleasure.
Let's test this idea. Imagine you unexpectedly received £30,000. What would you do with it? Think about your answer for a moment before you read on.
I suspect that your first answer included a variation of at least one of these: buy a new flat screen tele, take the children on holiday, buy a new car, go shopping for clothes, treat yourself to a luxury of some kind.
On second thought you may have decided you would give some of your cash away to people less fortunate than yourself, pay off debts, or make an investment of some kind.
If the evidence of our eyes and ears is to be trusted there are many people who wouldn't ever get as far as those second thoughts.
Yet what could be more responsible than paying off some debt? What could be more life-affirming than to share some of your good fortune and ease someone else's burden? What could be more rational than to grow that windfall rather than fritter it away on temporary pleasures?
In Peter Lynch's book "One Up on Wall Street" (1990) he talks about how his experience with Subaru demonstrates the value of using rational, researched knowledge to help make decisions:
"If I'd bothered to ask myself, 'How can this stock go any higher?' I would have never bought Subaru after it already went up twentyfold. But I checked the fundamentals, realized that Subaru was still cheap, bought the stock, and made sevenfold after that."
The point is to base a decision on future potential rather than on what has already happened in the past.
Most of us agree that using money to create even more money is an attractive idea. The tough thing about investing though is that it involves trying to make informed decisions based on things that are yet to happen. Trying to predict the future can be unsettling and lead to indecision and an inability to act.
We humans seek predictability. We like to know what's going to happen to us in any given situation - and if it's going to be painful we try to avoid that situation. Uncertainty can lead to fear and the one thing that is certain about the future is that it is uncertain. Consequently there's a lot of fear about!
As adults we recognise that if we allow fear to govern our lives they become increasingly restricted. So we find ways of dealing with it.
One strategy is to gain knowledge and to use it to help us combat irrational fear thus allowing us to make rational decisions. Then we can act rather than being frozen.
We use this strategy at Giroma to help us maintain direction as we pursue our goals. That's why we agree with The Independent's explanation for the last few months' property price rises: supply is insufficient for demand. Right now we see that demand operating just in selected situations and we don't expect to see the general property market taking off any time soon. But we do think the longer term prospects for UK residential property are bright.
Here are some indicators of a growing demand for property in the UK.
- "Current forecasts are for the UK population to move from 61 million currently to 70 million by 2029. And the chances of UK housebuilding keeping up with that, nearly zero. Expect long-term continued upwards pressure on house prices here in the UK." says Stuart Law.
- "Taylor Wimpey, the housebuilder, said market conditions had improved so much that it had already sold all of its stock of homes for 2009 and was looking forward to raising prices on houses to be sold next year." reports the Times Online, 4th Nov 2009
- Robert Booth, writing in The Guardian, Tuesday 29 September 2009 commented:
"In 2004, an economist, Kate Barker, warned in a government-commissioned review that unless housebuilding accelerates the country may have to accept 'increasing problems of homelessness, affordability and social division'. 'Five years later, the situation is worse' the report states.
The shortage in supply means that when the economy starts to recover, there will be a strong upward pressure on house prices which will not be good news for first-time buyers and those on low incomes."
There is a pent up demand for housing in the UK. It's as if property buyers are being held in a corral, fenced in by credit restrictions. When the economics allow it, the gates will open and those buyers will flood into the market place. It will be like a thousand starving people all trying to buy the last 100 loaves of bread in the shop.
The above scenario is based on factual knowledge about the supply of property in the UK. We think that's a sound basis on which to make decisions about how to make our assets grow in the coming years. It's a good reason for you to consider the FFP Lite programme, which allows you to gain access to some of the stock in what will be a very popular market.
The FFP Lite programme is firmly based in UK residential property. It pays you a fixed return monthly, benchmarked at 7% pa, while you wait for the property buyers' corral to burst open. Then, when buyers flood the market in a few years' time, you share in the capital growth. We think your combined return will reach 20%pa or more.
The recession is a fearful time for many. They are paralyzed by the conflicting rumours and reports. It doesn't need to be that way. This is a time of great opportunity. While the multitude mills aimlessly, those with a plan and the strength to pursue it will set themselves up to reap great rewards.
Overcome fear with knowledge. Take action today to get your money working for you.