The Market Cycle
HINDSIGHT IS A WONDERFUL WORD
LOOKING FORWARD IS MUCH EASIER WITH THE BENEFIT OF PAST KNOWLEDGE
HISTORY TENDS TO REPEAT ITSELF IN THE BROAD BRUSH STROKE IF NOT THE DETAIL
Market on the way up
The rise to the top of any market is caricatured by the spreading of disinformation about lack of supply coupled with enormous demand for the asset. “Outsiders” rush to buy on the perceived bargain and investment opportunities pushing prices higher and higher.
Top of the market
The top, which no one can really call, is the point when the “Insiders” are selling but the “Outsiders” are still buying.
Market on the way down
The fall starts with capital becoming scarcer and more expensive. The “feel good” bubble is punctured with wealth being destroyed with on-coming financial distress and withdrawal from the market.
As the supply shrinks so does the ability of “Outsiders” to gauge value as there are so few anchors to latch onto to assess perceived worth. The present cycle’s woe is compounded by the fact that there is no money left in the system to lend and no equity money has been saved by purchasers who have spent their boom years on credit.
This leads to a massive drop in trading turnover and “Outsiders” panicked by the market sell out forcing the market down. It is then left to the “Lenders of Last Resort” to inject the liquidity into the market.
How low can you go?
This is the part of the cycle when the “Insiders” start to buy again, when the values are perceived to be at the bottom, cash is king and balls are made of steel.
When to buy?
How much longer we have to wait is the six million dollar question but once money becomes cheaper with the lenders coffers in a more manageable state with loans available then more “Insiders” will buy and hey ho the trend starts over again with tales of great profits to be made and demand once more outstrips supply with the “Outsiders” pilling in once again.
The Residential Property Market
Shrinking volume and lower prices is the stage that the overall property market has been in for the last 18 months as the supply of the commodity (turnover of homes sold) has shrunk to half of the previous turnover.
The Mayfair Residential Property Market
Cash might be king when buying but when your own cash is plentiful and sitting in the bank there is an overwhelming desire to place a proportion into tangible assets. Recent sales in the prime art and property markets reflect this. The super prime central London market for residential is still active in the areas of Mayfair, Belgravia, Knightsbridge, Kensington and Chelsea, North London around Regents Park and Bishops Avenue.