Can You Beat the Property Market?

It is without doubt that the UK property market is booming. House prices are growing at their fastest rate in over 14 years, with prices increasing 9.6% in the year prior to May 2021. In fact, the last time investors witnessed returns like this was July 2007, the year before the great financial crash.  

For some property investors, this is the start of the great bull run, prophesised by the 18-Year Cycle. These coming years could well be the time in which fortunes are made and lives are changed forever. However, there are also investors who look at the current climate and see all the signs of market mania. Rather than doubling down, they argue that it is time to buckle down in preparation for a bumpy couple of years. 

Unfortunately for those of us without the same convictions, this poses a problem. Investment markets have always been full of charlatans and scoundrels, proclaiming the markets movements in one direction or another. How can landlords plan for the future, when they are posed with such diametrically opposing views? 

Herein lies the fallacy of choice. As Friedrich Von Hayek, the Nobel Prize winning economist argued: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” Much as we might pretend otherwise, few if any of us can predict or control the market. 

You Cannot Predict the Market, But You Can Still Beat it! 

Whilst few people can predict the property market, it is still possible for small landlords and investors to beat the market. To paraphrase the words of Kipling, investors need only keep their heads when all about them are losing theirs. Simply, landlords should avoid becoming embroiled in fanciful theories and predictions and instead focus on the specific details of investment. 

Unfortunately, thorough research and pragmatic decision making are not terms which capture headlines. However, they are the tried and tested route to consistent profitability. Rather than losing their heads and following the market, the most successful landlords continue to implement and refine their winning strategies. Buy, add-value, rent and reinvest. 

Whilst it took seven years for the average property price to recover from the financial crisis, some properties may never recoup their original purchase price. There are countless premium flats in semi-urban areas which sell for nearly half their original value to this day. In comparison, sought after locations in central London and St Albans recovered in a matter of years, proving that it is not when you buy, but what you buy that counts. 

How Can You Beat the Market? 

It may sound ludicrous that investors can beat the market by merely ‘keeping their heads’. However, rational value-investing is easier said than done. It takes resilience and discipline to avoid the market’s noise and maintain a winning strategy.  

So, what steps can landlords and investors take beat the market? It can be worth keeping some of the following in mind: 

Temper Your Greed 

Warren Buffett once stated that investors should be fearful when others are greedy and greedy when others are fearful. Greed, both from yourself and others, should be a warning sign. Whilst fortunes can be made during bubbles and market mania, livelihoods can also be lost. It takes discipline to avoid following the crowd in pursuit of a quick profit. However, such temperance can pay off in the long-term. 

Sense Check Your Decisions 

Many of the most successful people in the world utilise mental frameworks to sense check their decisions. Jeff Bezos, founder of Amazon, relies on a Regret Minimization Framework. He projects himself into the future to consider how he will view particular choices when he is ‘X’ years old. You may regret missing out on quick profits today, but would you regret it as much as spending the next 10 years having to work your way out of negative equity? When making significant decisions, it can pay dividends to step back and consider what you are truly trying to achieve and whether your choice moves you closer to your end goal in the long run. 

Stick To Your Comparative Advantage 

There will always come a time when you begin to doubt either the market or yourself. When this occurs, it is worth doubling down on what you know best. Stick to your area of expertise, be it the most basic form of vanilla buy-to-lets or more complex HMO’s. If you are uncertain, your best chance of success will lie in the area where you have the most knowledge. This can benefit you on two fronts. Firstly, there is comfort and confidence to be found in familiarity. Secondly, you can focus on making decisions in an area where you have the most expertise, reducing the likelihood that you make a mistake which you come to regret. 

Rely On Ratios 

Sometimes it can pay to go back to the basics. Focusing in on ratios to compare the value of different opportunities can help to block out market noise. Compare current opportunities versus past properties you have purchased. Are you accepting a lower return on investment (ROI) and if so, why? Are you taking on greater risk for the same returns?  

Unfortunately, there is no exact blueprint to success. Much as Landlord Vision may wish to write one, there is no simple ‘How To Get Rich’ guide. Instead, landlords must invest in themselves and constantly refine the decisions that they make. The way to beat the market is not by predicting its destination, but by focusing on the journey. 

Disclaimer: This ‘Landlord Vision’ blog post is produced for general guidance only, and professional advice should be sought before any decision is made. Nothing in this post should be construed as the giving of advice. Individual circumstances can vary and therefore no responsibility can be accepted by the contributors or the publisher, Landlord Vision Ltd, for any action taken, or any decision made to refrain from action, by any readers of this post. All rights reserved. No part of this post may be reproduced or transmitted in any form or by any means. To the fullest extent permitted by law, the contributors and Landlord Vision do not accept liability for any direct, indirect, special, consequential or other losses or damages of whatsoever kind arising from using this post.