Since the birth of the internet and 24 hour news there has been a rich pool of information at our fingertips. Whatever we want to know and whenever we want to know it, we can simply type a question into a search engine and find an abundance of answers.
As a usually credible and trustworthy source, news outlets are often the go-to media for someone on the look-out for the ‘truth’. Afterall, certainty is one of the six human needs. However, this does mean that the media have a certain power of influence.
The UK population, unlike our European counterparts, invests so much in terms of time and money into property that we are also extremely conscious of what the media reports on this topic. What many of us tend to forget is that, like most businesses, the media is in the business of selling. And what sells? Bad news.
Until the middle of 2008, when all across media headlines was supposed facts and figures about falling house prices and homes being repossessed, it was enough for the public to perceive that it was a financial disaster for both home owners and buy-to-let investors. Was half the nation about to be made homeless?
Indeed, for those who invested without doing their due diligence or calculating the potential returns of a property portfolio, it might have been a difficult time. Or if a home owner had bought when prices were sky high and needed to move, they could have found themselves in negative equity.
However, second-steppers were not as hard done by as they were made to believe – they were made to feel like their home was losing money, when really, they still had a fair amount of equity if they’d bought some time ago and the next home they would buy would be cheaper. It’s all relative.
Savvy investors would also have been aware that when prices are falling, and the headlines are still at the most cynical level, it’s a good time to buy. As Baron Rothschild said – ‘Buy when there is blood in the streets’.
The situation today is similar. A common theme over the last 18 months has been the surge in house prices. The problem is that over-generalised media coverage always focuses on the mass market and worst case scenario. Yes, house prices are rising on average across the country, but some areas of the UK are only just back to pre-2007/8 levels. Each area has a micro-market in the UK and property market conditions can vary by just a few miles.
Another recurring topic has been that of rising house prices and ‘mean’ buy-to-let investors locking young people out of the property market and forcing them to rent. There is a significant absence of articles praising the positive role buy-to-let plays in society, plugging a gap in the housing shortage. Very few stories also take the angle that wage increases have struggled to keep pace with inflation and without private rented accommodation, many people would not be able to even afford to rent. It’s also becoming more of a lifestyle choice as ‘Generation Rent’ prefer not to be tied down with a mortgage to a particular area and enjoy the flexibility renting provides.
What’s more worrying is the coverage of the cuts to landlord tax relief on mortgage interest payments and how it’s potentially scaremongering investors into thinking they need to sell up. What hasn’t been covered, at least not extensively or in the mainstream media, is detailed analysis of how landlords could alter the set-up of their portfolios to improve their position.
One article in the Telegraph says buy-to-let is booming as banks profit from savers cashing in pensions, and another, published just three days before, says buy-to-let is dead. There may be truth in both stories, but this just proves that you have to remain open-minded when using the media as a source of information and not look at articles in isolation.
What you read, see and hear in the media has the potential to influence your perception of many things, including property investment. The fact is that ‘boom and bust’ is a naturally recurring trend in the property market, but there is never a bad time to invest – provided that you undertake a sufficient amount of detailed due diligence so that you come up with an investment strategy that suits your own circumstances and goals, and one that can be stress-tested against a changing market.
That’s not to say that the media doesn’t play a vital role in society, but you should take ‘news’ of any form with a pinch of salt and combine with expert knowledge and advice to make an informed decision. Give due consideration to media headlines and statistics, but also surround yourself with successful players who have a track-record and a tested and proven model.
Remember, cash flow is King and allows you to ride out storms and remain profitable in even the worst of times – just as PPP proved during and after the global financial crisis.