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Consumers Move Away From Property As Long Term Investment

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"Sentiment" is changing very fast. According to this survey the number of people who see property as the best long-term investment has fallen from 49% in September 2010, to 34% in December. One third of "property believers" lost their "faith" in just 3 months! (Edit to add: The spring market "pent-up supply flood" is on! :D )

" Association of British Insurers (ABI), Quarterly Consumer Survey 2011 "

Source and data table here: http://www.abi.org.uk/Media/Releases/2011/01/Consumers_move_away_from_property_as_long_term_investment.aspx

Consumers move away from property as long term investment

The number of people who see property as the best long-term investment has fallen to its lowest level, falling by almost a third in the last three months of 2010. The findings come from the ABI quarterly consumer survey, which showed that savings accounts, stocks and shares and national savings have all seen an increase in favourability as confidence in property has fallen.

Of the 2,500 people surveyed, 34% saw property as the best long-term investment in the last quarter of 2010, down from 49% just three months previously. While property still remains the most popular asset class, the number of people who favour it is at the lowest level since the ABI started the survey in Q3 2008.

Helen White, the ABI’s acting Director of Life and Savings, said:

“For the vast majority of savers, a pension should be a fundamental part of their savings plan. Pensions attract generous tax relief, and through life styling, can reduce risk as people approach retirement.

“We know that over 40% of people are not taking basic steps to save sufficiently for their retirement. This may be as property, despite this fall from favour, is still seen by many as being their retirement nest egg. This is despite the dangers of investing in a single asset and the lower returns on property compared to equities for long term investments.”

ABI analysis also shows that, between 1960 and 2009, the return for equities is higher than the returns on property for nearly all 20-year investment periods. Even over a much shorter period, equities are the top-performing asset in 64% of 5 year periods between 1960 and 2006

Edited by Tired of Waiting

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"Sentiment" is changing very fast. According to this survey the number of people who see property as the best long-term investment has fallen from 49% in September 2010, to 34% in December. One third of "property believers" lost their "faith" in just 3 months!

" Association of British Insurers (ABI), Quarterly Consumer Survey 2011 "

...best to regard it as a house for living in....less disappointed that way....but even that has become high risk due to Gordo Browns boom and bust...... :rolleyes:

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...best to regard it as a house for living in....less disappointed that way....but even that has become high risk due to Gordo Browns boom and bust...... :rolleyes:

3 things surprised me in that research: (1) The very low percentage, 34%; (2) The speed of fall; and (3) That these 2 were related to the LONG term! :o

Crash we come! :D

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Personally speaking I don't intend to buy anything. But from a cyclical point of view the best time to buy is when property is seen as the absolute worst investment available. That is referred to as 6am on the property clock, the dawn of the recovery phase. Most won't recognise this point in the cycle as the journalist won't recognise it, there will be no signs up procaliming it and there will be far too many real life horror stories where the average punter knows somebody that has been hurt during the slump phase.

yes, except I think that is many years away

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Personally speaking I don’t intend to buy anything. But from a cyclical point of view the best time to buy is when property is seen as the absolute worst investment available. That is referred to as 6am on the property clock, the dawn of the recovery phase. Most won’t recognise this point in the cycle as the journalist won’t recognise it, there will be no signs up procaliming it and there will be far too many real life horror stories where the average punter knows somebody that has been hurt during the slump phase.

I think we are far from the bottom. I think prices will fall by some 10%/year for 2 or 3 years, and then will be flatish for a few more years.

A clear sign of a price bottom is always high volumes.

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Personally speaking I don’t intend to buy anything. But from a cyclical point of view the best time to buy is when property is seen as the absolute worst investment available. That is referred to as 6am on the property clock, the dawn of the recovery phase. Most won’t recognise this point in the cycle as the journalist won’t recognise it, there will be no signs up procaliming it and there will be far too many real life horror stories where the average punter knows somebody that has been hurt during the slump phase.

That will be when no one wants to touch property. When people laugh at you fir considering buying. That survey will probably read <10% by then.

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I think we are far from the bottom. I think prices will fall by some 10%/year for 2 or 3 years, and then will be flatish for a few more years.

A clear sign of a price bottom is always high volumes.

interesting - by what mechanism is that?

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High volumes will just be a consequence of prices becoming affordable again.

aah - hyep - I'm with you - the market clearing price

good point, notwithstanding other influences (heaven knows what they could be)

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Thats about twelve noon on the clock when sales volumes pick up.

Theeris nothing wrong with buying at that point and you can also rest assured that it is the end of the recovery pahse and the start of the boom phase.

5-9am is the best time to buy as you will have had the best buying price and you will already have a few years of inflation eroding your debt behind you and hence more equity and lower monetary value of debt and repayments.

this is interesting - what you are implying is it is NOT an efficient market (of course we know that...), so the clearing price is recognised by the masses somewhat later than the fact, owing to market psychology; ergo, there is a sweet spot where nobody wants to know, such as the bottom of the stockmarket trough in early 2009 ???

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Personally speaking I don't intend to buy anything. But from a cyclical point of view the best time to buy is when property is seen as the absolute worst investment available. That is referred to as 6am on the property clock, the dawn of the recovery phase. Most won't recognise this point in the cycle as the journalist won't recognise it, there will be no signs up procaliming it and there will be far too many real life horror stories where the average punter knows somebody that has been hurt during the slump phase.

yes, but the cycle in UK is 18 years !!!!!!!!!!!!!

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Yes no one rings the bell at the bottom and the it takes some time for the buyers to get over the negative inertia from the slump, there are also many sub markets within markets. So some areas could be well into recovery and some not and the group think will be with the latter.

Technically I would say the bottom is when the yield is at its highest ie housing price low and rent high. That is when the economic decision to buy a house is most compelling against renting a house. But most will wait until after that to jump in including the speculators, who have been known to jump in right up until after midnight. Seasoned cash flow investors ( a rare species) will probably be the first to move and they are a quiet old bunch of cattle and no one will observe them grazing.

you're describing the basics of value investing for any asset class, which is entirely fair. Certainly something I shall do, but I don't see an opportunity for some time, but I am not arguing on that of course! Patience, of course....

I still like your advice on sensible long term cashflow houses - nice house, nice area, nice sitting tennants, win-win; as part of a diversified portfolio of course, but not TOO diversified!!

(and that 2nd point about good long term cashflow is the 2nd lesson of value investing for the warren-Buffet admirers amongst us - economic moats, a good long term cash flow for a fair price is better than a bad long term cash flow for a cheap price)

Edited by Si1

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Thats about twelve noon on the clock when sales volumes pick up.

Theeris nothing wrong with buying at that point and you can also rest assured that it is the end of the recovery pahse and the start of the boom phase.

5-9am is the best time to buy as you will have had the best buying price and you will already have a few years of inflation eroding your debt behind you and hence more equity and lower monetary value of debt and repayments.

Yes, I agree. Usually the ideal moment to buy is when volumes start to go up. Though one can never be too sure, as it could be a temporary blip.

Edit: There are personal circumstances too, of course. In my case, if prices around here fall by some 10%/year for a couple of years we'll probably buy, even if it is a bit too soon, as we want security, to start a family, etc. And coz I am really fecking "Tired of Waiting"!

Edited by Tired of Waiting

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Yes, I agree. Usually the ideal moment to buy is when volumes start to go up. Though one can never be too sure, as it could be a temporary blip.

my big concern is this: is the bottom due in 3 years or so, or (more likely in my opinion) germany-style in 10 years after prolonged long term real terms falls?

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I think we are far from the bottom. I think prices will fall by some 10%/year for 2 or 3 years, and then will be flatish for a few more years.

A clear sign of a price bottom is always high volumes.

I disagree. A sign of a price top is low volumes as we have now, imo. A price bottom is indicated by normal volumes because an equilibrium has been reached, again imo. Your forecast is of different behaviour from the last bubble. It will be different, I think, in that it will be bigger falls over a longer time, since this bubble is bigger.

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Consumers of property ! I'm not sure what most consumers consider long term in a world where a lot of products have a very short lifecycle.

Jump on another bubble I say!

and join the race to find real returns until the market closes!

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Consumers of property ! I'm not sure what most consumers consider long term (...)

Good point. The ABI didn't say what was the actual question they've asked in their research, the wording of it. They also didn't say if they just asked property buyers or general population.

(...)

and join the race to find real returns until the market closes!

I think nowadays the prudent investor should / is just being defensive, avoiding capital losses, until the storms calm down a little.

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I disagree. A sign of a price top is low volumes as we have now, imo. A price bottom is indicated by normal volumes because an equilibrium has been reached, again imo. Your forecast is of different behaviour from the last bubble. It will be different, I think, in that it will be bigger falls over a longer time, since this bubble is bigger.

We are not too far apart. I generally agree with you. I just think that, thanks to Brown's delaying tactics, we have had 3 years of very low volumes, that must have accumulated a "pent-up supply" out there. (Peoples' lives went on, with changes, etc.) A lot of sellers were delaying selling waiting for prices to "recover". Now millions of pence have dropped (and are dropping as we speak/type), and I think we will have increasing volumes from now onwards, and at some point in the next few years these volumes should even over-shoot the "normal" long term average, due to these past 3 years pent-up supply.

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