UK Housing Sector Shows it is Easy to Put Investment Decisions on Hold

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UK Housing Sector Shows it is Easy to Put Investment Decisions on Hold

UK Housing Sector Shows it is Easy to Put Investment Decisions on Hold


The Market and Political View from Adam Jepsen, Founder, Financial Spreads.


The UK housing sector is a microcosm of the problems that investors face.

It can be difficult to value investments in normal market conditions, with the current unknowns surrounding the UK, the variables are off the scale.

It's easy to put investment decisions on hold.
- - - - Investment Variables Are Off the Scale - - - -

In very simplistic terms, and with normal market conditions, it's possible to answer key investment questions such as:
  1. Current share price / what are others willing to pay for company XYZ?
  2. What is the current fair value?
  3. What are the growth prospects?
  4. What are the significant risks?
There are a lot of ways to judge the above but, once assessed, it's possible to make a decision on whether to invest or not.

Trying to answer the above questions in the current environment is a completely different kettle of fish. E.g. looking at the UK housing sector:
  1. Current share price? Unclear. The housing sector is rarely placid but in the last month there have been rapid moves including an 8% drop, 9% rise, 16% drop and 12% rise. [1]

  2. Current fair value? Unclear. There are many issues e.g. many land assets will have been procured for different market conditions and could easily be too expensive.

  3. Growth prospects? Unclear. Interest rates could remain low for sometime but will there been a foreign exodus (forced or unforced)? Will buyers put off purchasing decisions because they expect cheaper prices in the future?

  4. What are the significant risks? With Brexit there are many and they are big and ugly.

With the numerous unknowns and extreme variables, many investors are likely to put their decisions on hold.

And like the circular referencing your spreadsheet shakes its head at, 'A, B, C and D' feed back into 'A'.


- - - - It's Easy to Put Investment Decisions on Hold - - - -

Let's remember that there different types of investor e.g. there is the trading type who buys / shorts the markets.

There is also the type that is more important for the UK, i.e. the person/company looking to invest in their business, hire new employees etc.

It's the latter who, if they haven't already, will put many of their decisions on hold.

This is not good news for UK PLC.

[1] Based on the FTSE 350 'Household Goods and Home Construction Sector'


By Adam Jepsen, 11 July 2016


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