{"id":3231,"date":"2016-08-17T10:00:37","date_gmt":"2016-08-17T09:00:37","guid":{"rendered":"https:\/\/blog.propertypartner.co\/?p=3231"},"modified":"2020-10-22T14:35:19","modified_gmt":"2020-10-22T13:35:19","slug":"head-vs-heart-the-psychology-of-property","status":"publish","type":"post","link":"https:\/\/www.londonhouseexchange.com\/blog\/head-vs-heart-the-psychology-of-property\/","title":{"rendered":"Head vs Heart: The psychology of property"},"content":{"rendered":"

Head vs Heart: The psychology of property<\/strong><\/p>\n

Buying a property is an emotional thing. In fact, it\u2019s an astoundingly out-of-the-ordinary purchase for most of us. You\u2019re likely to spend more time buying a second-hand car than you are buying a property. You visit once, maybe twice – and often decide to buy within the first 30 seconds of viewing a property: it\u2019s called curb appeal. But this is the biggest purchase of your life.<\/p>\n

Emotions sway our decisions across all investment markets – especially the stock market – and history shows us that we aren\u2019t nearly as rational as we think. So what emotional factors tend to affect the property market – and what does it mean for investors?<\/p>\n

Our Director of Property, Robert Weaver, has seen investor behaviour through two property market cycles, and is one of the UK\u2019s top property experts. Here we share his knowledge:<\/p>\n

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When the market is growing<\/strong><\/p>\n

\u2022 Fear of missing out <\/em>
\nWhen the market is growing, buyers have a tendency to rush in – keen to get a foot on the ladder before they\u2019re priced out. This further aggravates growth.<\/p>\n

\u2022 People often overpay <\/em>
\nEven when people are buying property as an investment, rather than a home, they\u2019re still likely to overpay if they really like it. Moreover, demand far outstrips supply, and buyers are worried that someone else might snap their property up. By contrast, when Property Partner secures an investment, we never overpay, and are usually in a position to negotiate a discount.<\/p>\n

\u2022 People don\u2019t negotiate enough <\/em>
\nSurveys come quite far down the line when it comes to buying a property – and people tend to be very emotionally engaged by this point. When the results of any surveys come through, people can often be too scared to ask for money off if any issues are noted, in fear that they may lose their future home.<\/p>\n

\u2022 People tend to over-leverage <\/em>
\nBuyers will often over-burden themselves with debt, because they have to, or because they want to amplify their returns, believing that property prices will continue rising. This can be dangerous. At Property Partner, we take a reserved approach to risk, and will never leverage more than 60% of our investments, and most are at 50%. Ultimately – mortgaging a property increases risk, as well as return on investment.<\/p>\n

\u2022 Buy-to-let investors become over-confident <\/em>
\nBuy-to-let investors with high LTVs (loan-to-value mortgages) tend to become more reckless, because they have less of their money invested. They often don\u2019t look at the yield enough, relying on capital growth, and often don\u2019t work out the costs properly either, overestimating what their property will deliver from them. This overconfidence also pushes prices up.<\/p>\n

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When things get a little rocky<\/strong><\/p>\n

\u2022 Most people don\u2019t sell <\/em>
\nIn times of uncertainty, or downturn, people don\u2019t tend to panic sell their homes \u2013 they sit on them, and wait for things to improve. This removes stock from the housing market, and pushes prices back up – and this is particularly true of owner occupiers with high LTV mortgages, who will rarely be willing to sell for below the value of their mortgage. Investors are also unlikely to exit, as they will continue to earn a decent rental income, even if prices fall – and will wait until price rise once more.<\/p>\n

\u2022 The \u2018needs-based\u2019 market <\/em>
\nThere will always be those with personal circumstances that require them to sell at a bad time. Death, divorce, and debt are three common factors. There is always a price to pay for liquidity.<\/p>\n

Investor mentality on Property Partner<\/strong><\/p>\n

Interestingly, our investors have made purchase decisions more rationally than they would likely have done if buying a property themselves. Below is a list including some of the most popular properties on our platform to date:<\/p>\n

30 Cherington Road, Hanwell, W7<\/a>
\nFlats 1, 5-7 Tower Mint Apartments, E1<\/a>
\nThornwood, Eastbourne, BN21<\/a>
\nFlat 128, Vantage Building, Hayes, UB3<\/a>
\n80 Manordene Road, Thamesmead, SE28<\/a>
\n37 Friars Close, Seven Kings, IG1<\/a>
\n2, 17, 19 Garden Court, West Drayton, UB7<\/a>
\n129 Southwood Road, Hayling Island, PO11<\/a><\/p>\n

While many of these properties are aesthetically pleasing, the more common indicators of popularity are by the strength of the yield, by purchase discount, or by growth prospects, with many of these properties being very close to Crossrail stations around London.<\/p>\n

Some interesting behaviour was also seen in the weeks following Brexit – a momentous decision that shocked the commercial and stock markets into chaos. So far, the Property Partner Resale market has reacted as you would expect. The majority of investors chose to hold their investments, however, the market saw some impulse decisions, and fast trades being made.<\/p>\n

After two weeks, only 0.33% of total investment was listed on the Property Partner resale market at a discount to the initial listing price, with a large number of bullish investors sweeping in to buy these shares from panic sellers. At one point, over \u00a31 million cash was readied \u2013 but just \u00a3113k was left on the marketplace at a discount to original listing. 631 investors snapped up 99.32% of these shares in just two days.<\/p>\n

Whether you\u2019re feeling \u2018bullish\u2019, or \u2018bearish\u2019 about the property market, you can now place bids on property shares in our Resale market. Trades happen fast, and there are always deals to be found – though the majority of our investors prefer to play the long game. Take your view, and see what you can find on the marketplace now:<\/p>\n

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