While understanding what’s driving markets is integral in maintaining a successful property portfolio, it is often the most complex part of investing, according to an expert in the space.
Speaking on a recent episode of The Smart Property Investment Show, Propertyology’s head of research, Simon Pressley, explained why the value of understanding market drivers is key to a sustainable investment strategy.
“I guess it’s probably the most sexy part of investing. The thing that people are most interested in, but it’s also the most complex. It’s impossible for everybody to know everything or to become an expert in market research, unless you’re doing that for a living,” Mr Pressley said.
“But there are some basic things that I think every investor should know. To me, they include things like understanding that every individual town or city has a property cycle and what we call a growth cycle. So, a period of years where property markets are performing strongly.
“History has taught us that they generally only come around once every 10 to 15 years. They don’t happen very often. And they usually only last somewhere between two to four years; they don’t last very long.
“So, some basic things that I encourage every investor to be aware of is market cycles. Understand the role that a local economy has on a property market. And if there’s one thing you want to take an interest in, if you do like research, it’s to understand: What are the main industries that drive each individual town and city’s economy? And what are the decisions that are happening today that’s going to have an influence within those industries in the coming couple of years?
“That’s always the gold in information. We certainly focus more on that than anything else.”
Further to this, Mr Pressley advised investors to “understand that the behaviour of the existing population... will always have a much bigger influence than the 1 per cent population growth in the next year”.
“We’ve spoken before about population behavior is more important than population growth, and also residential construction. Too many crimes can be a growth suppressant if behind all those cranes is more future supply than what the local population requires.”
To listen to the full episode featuring Mr Pressley, click here.