When you hear a news announcements predicting an imminent drop in the economy or see an article discussing the credit crunch, what is the first thought that you have regarding money? For the ‘average’ person it might be to identify possible methods to reduce their monthly outgoings. This would be understandable, as fear is a powerful emotion for determining how and where we spend our hard-earned income.
House owners decide that it is a bad time to sell their house to buy a new home, Drivers decide that it is not a good time to buy a new vehicle, parents vow not to spend a fortune on Christmas gifts for their children. Basically, demands for numerous products and services are reduced.
As an example, when less individuals are prepared to buy new homes, the cost of the average house drops. What happens to the rental market? The irony is that this is the best time to purchase a home if you have money and do not need to sell your house to buy the property.
Those people with capital to invest are grateful for the current economic ‘crisis’! They can buy rental properties at a much lower cost and there is an increased likelihood that they will find tenants. Hence, they are able to capitalise greatly from the changes in the economy.
Banks have suffered as a result of the economic shifts and many have needed financial backing from the government, but the government will capitalise from these arrangements. They will own shares in the banks and the economy will recover in time. As an example, in November 2008 the government acquired 57.9% of the Royal Bank of Scotland in the UK.
Usually, whilst one group of people is struggling, another group is benefiting. When retail sales fall, direct sales increase, when the property market falls, the rental market improves. When banks struggle, the government benefits. The goal is to be on the best side of the equation!
Now I know what you are probably thinking: “I don’t have capital to invest”. A recent article on the BBC news website (22nd January 2009), detailed a study from two leading US trend predictors. They suggested that by researching the effects of 18 similar financial events gloabally, that it could be as long as 6 years before property prices reach an all time low and 3 years for the stock market to reach its lowest point. These are only the findings of one project, but if you take ownership of your income now, you may be in a position to invest within the next 3 to 6 years. This may be the last chance you have during your working career to capitalise on these economic trends!