What goes up must come down. Therefore housing market crashes are inevitable. It’s only a matter of when? There are strategies that investors should bear in mind to always be ready for a potential housing market crash. Remember the old slogan that says “failure to prepare is to prepare for failure”!
- Don’t over leverageas this can put a strain on any business should there be a drop in property prices. If you’ve maxed out all your debt, then you have left yourself no wiggle room or leverage should you need to refinance your assets or to access equity.
- Always keep your liquidity intact. Despite today’s loony economics ‘Cash is still the king’. Access to your capital or cash flow is the key to survival and sustainability during crash situations. Cash not only can keep your business afloat and gives it a necessary lifeline but it can also gives you more flexibility to take advantage of inevitable opportunities that will come your way in a sinking market. Liquidity can be an enormous advantage during a recession.
- If you are a landlord you must look after your tenants. They provide you with cash flow and a passive income when you may need it most. Give them breaks and resources and be flexible with them when necessary during hard times, especially during the pandemic.
People are not Statistics
Large scale evictions due to foreclosures, mortgage and rent defaults have been temporarily halted due to the pandemic. There are still vast numbers of people in distress and unable to pay their rent or mortgages. In most cases accommodations can be arrived at rather than resorting to evictions. Remember that those people are human beings and not statistics and they paid when they could and will when they can.
During the pandemic layoffs and lockdowns Government intervention, including stimulus payments provided a lifesaver for many, but when government intervention inevitably comes to a stop, there will be casualties all around. This alone could result in a housing market crash in 2022 or shortly thereafter as those involved delay the inevitable as long as possible. When you combine this with the ensuing panic this could bring about with current homeowners panicked about missing the boat, or worse, going under we could be in for a crash similar to the 2008 Great Recession.
The bottom line for investors is that they need to be prepared for each market cycle, including the inevitability of a property market crash. On a brighter note, this can also bring many purchasing opportunities that may come about as happened during the last property crash. Preparation provides opportunities.
Cathal Quigley the author has written this article for ‘The Irish people’. He is writing under a pseudonym as he is a financial insider whose position could be jeopardised as a result of writing this article. He is eminently more qualified than any ‘Fact Checker’.