There appears to be growing talk of the potential for a so called ‘double dip’ recession. Although I am certain that this is being driven once again by the media, ever hungry for bad news, it got me thinking; how exactly would this affect property investment? and indeed is there any potential for profit?
Firstly, what is a double dip recession? As the name suggests this is simply a case of the economy slowing again, following a short period of economic improvement. Depicted as a graph this would resemble a ‘W’ shape. This has happened before, but personally I believe that the current recession will not follow this pattern, however, would it really be that bad for property investors if it did?
Let’s look at how this could affect the various types of property investors.
1. The property investor who already owns property purchased before the recession.
2. The investor who purchased property at the bottom of the market.
3. The investor who has yet to purchase property.
A double dip recession resulting in a further dip in property prices would provide increased opportunity for all property investors. Yes really, here’s why:
Investor #1. Any property you purchased before the recession will return to growth over the long term regardless of a short term dip in prices. You can only be harmed if you sell the property when prices are low. Ignore any losses, as long as you don’t sell these only exist on paper. Instead, use the opportunity to add to your portfolio while prices are low and maximise your investment returns. Verdict – You’re a winner!!!
Investor #2. You purchased at the bottom of the dip. Congratulations, you read the market well. If prices fall to below this value, so what? You’re not going to sell and prices will soon rise again. However, you can add to your portfolio at prices even lower that you thought possible earlier in the year. Verdict – You’re a winner!!!
Investor #3. You haven’t yet invested in property. Why not? At the moment it would appear that you missed the bottom of the market. No big deal – buy now whilst prices are still pretty much rock bottom, (remember I don’t believe there will be a double dip recession). However, if there is a further fall in prices you will have a second opportunity to invest right at the bottom of the market. Verdict – Don’t miss it and you’ll be the biggest winner!!!
So there you have it. Would a double dip recession be a problem for property investors? Of course not, to the contrary, it would provide opportunity. Property investment is a long term wealth building strategy. Time is the single biggest factor in providing return on investment, a dip in house prices simple enables you to take greater advantage of this.
