By Javed Khattak
As we draw the the end of 2019, the property market has shown clear signs of slowing down, leading many investors to evaluate their property investments. The continued uncertainty has led many to question whether it can deliver on their desired investment or income objectives. Here, property investment expert Javed Khattak, founder of Zisk Properties reveals why uncertainty is the biggest obstacle to achieving property investments success.
Much of the uncertainty that we see in the property market comes from an innate sense of fear, of not knowing what is around the corner. A lack of market knowledge and expertise leads the general population to steer away from perceived risks, For those who are already invested, negative narratives around issues such as falling house prices cause them to enter into panic mode. Sadly, most lack the skillset to effectively navigate their way through such difficult times and still benefit financially.
The truth is, the only solution is to make the fear disappear. You can take away some of that uncertainty through a combination of education, mentorship and capacity building. Right now, a small number of investors who are ‘in the know’ are capitalising on the ignorance of the masses and making money whilst everyone else is scratching their heads in disbelief. They benefit because the general public are simply not aware of the services and mechanisms that exist to help them to better understand the cyclical behaviour of the property market, how to identify profitable property opportunities and how to create a strategy which results in financial gains even when the market is less than favourable. If you are willing to educate yourself and focus on seeking out such services, the opportunities presented will be plentiful.
Factors to consider
There are many considerations to factor in when formulating a sound property investment strategy. Naturally, seeking out those property ‘gems’ is no mean feat; there is significant due diligence to be undertaken on the property itself as well as a thorough undertaking of your current financial circumstances and an understanding of your investment time-frames and the property market. These factors affect what you need to get back from your investment, which must be at the core of any investment. Whether you are a long-term investor building a portfolio or a short-term investor who needs an immediate income, there is a property investment solution out there that is just right; you just need to know what you are looking for.
Diversification is one way to alleviate some of the concerns associated with property investing. This is because a diverse portfolio of investments will include a mixture of high and low risk investments, which overall brings you out somewhere in the middle. It means you can feel more comfortable taking a risk with a certain proportion of your investments because you’ll have a solid and stable return from the safer investments. Examples of more high risk investments could be crypto-assets and startups, where there is greater uncertainty or less regulation. Safer investments tend to be government bonds, shares and tax-free ISA wrappers which sit around a variety of assets.
When it comes to formulating the perfect approach to risk, the jury is out. Some investors swear by scientific approaches to this process, such as the Modern Portfolio Theory. However, research has also indicated that less-scientific approaches can be just as effective, so if you feel more comfortable going with ‘gut-feeling’, there’s no evidence to suggest this is an ineffective approach.
Diversification should also be done within an asset class. So diversify your property investments as well. You can diversify on the many aspects or characteristics of property, examples its location, its type ( commercial, industrial or residential), its return type (capital growth focused or rental yield focused or both), and so on. There are also different levels of investment available too, meaning that those who don’t have large sums available can still invest through property crowd-funding platforms, property funds, REITs (Real Estate Investment Trusts) or shares of companies operating in the property sector.
Reality vs Perception
It’s been long accepted that public perception drives the markets and uncertainty in the property sector will remain as long as we allow it to exist. Education enables you to gain a deeper understanding of the reality of the property market, allowing you to make clearer judgements on the perceived risks of investing in a certain property, type or location.
I have been of the view for some time that Brexit would have a minimal impact on the real estate market, especially if you are considering the long term. This is evidenced by the resilience property has shown through difficult times in the past. Not only that, recent data confirms that the UK housing market continues to fight back and, in fact, there is a general consensus that the prices will increase. Naturally there is some variation between regions, but overall the views are positive.
The UK continues to attract significant foreign investment and London remains a strong financial centre. When you are looking at the long term, the UK property market will continue to be an attractive and profitable investment strategy in my opinion. Those who are dedicated to improving their knowledge and to working with those who can advise and guide them, will be best positioned to benefit from the inevitable rise in property prices that will occur in the years to come.
About the Author
Javed Khattak is a qualified actuary (FIA), an LSE graduate, an award winning C-suite executive and on various boards. His clients range from governments and central banks through to startups and organisations with a market cap of over £100bn including global household brands such as HSBC, Thomson Reuters, GSK, M&S, Aviva and PwC, to name a few. His area of expertise include risk management, strategy, finance, real estate, technology, innovation, FinTech, PropTech, blockchain, AI and data analytics. Javed, amongst other companies, is the co-founder of Zisk Properties, which uses the latest technologies (like DLTs, AI and data analytics), crowd-funding and an FCA registered fund to lead the property market.
For more information visit www.ziskproperties.com