Don't Look Back to Foresee the Future

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"Why are we so obsessed by past performance as an indication of future behaviour?"

This question was posed by entrepreneur and CA (SA) Andile Khumalo in a thought-provoking investment column published by the Sunday Times Business Times last week-end.

It could hardly have been better timed - at least from a residential property market point of view.

The past decade since the 2008/9 financial crisis in the property market has been ugly. But it is now history. And it happens far too often that we try to square history with our expectations on the immediate future.

History has muddied the water horribly for the moment. And constantly looking over our shoulders to where we have come from is creating very difficult decisions around the potential the future holds.

Many of today's home sellers are sitting in the red as far as their property investments are concerned.

An appropriate remedy

To try to play catch-up - or to correct or fix the poor performance we have all experienced - by achieving an appropriate remedy in this market, may well be folly. 

It's a bit like a gambler who has lost five times in a row at the roulette wheel and is now making his betting decisions on how to recover his losses.

Is it not much more pragmatic to diminish the importance of the history and, instead, look forward to new prospects - albeit that they will be developed off a lower base?

In other words, it means coming to terms with the market as it is currently, and doing the right things now - without allowing your decisions to be tainted by the ever-haunting fear of the losses that so many sellers feel they are facing.

Imagine an immigrant arriving here and starting afresh. He would see the glass is half full with all the potential that exists. And he would have no reference to historical losses.

There is that old saying: 'Today is the first day of the rest of your life'. Against that background, "wait and see" is a poor strategy.

Glass half empty

Therefore, cut losses - they preoccupy the mind far more than they should - and move forward. Not doing so would be dwelling on a glass that is half empty.

Recently a Johannesburg seller, who had bought his house in 2015, has been receiving offers in the current market at equal to or less than he paid for it. This has caused him great discomfort - even though the marketing process and activity is clearly showing the new (lower) value level that the house is now sitting at.

It would be prudent and more comforting to ignore the history - it cannot be changed - and work with what is in front of him.

Perhaps we worry too much about things we can't do anything about - constantly looking over our shoulder. 

A new cycle

By contrast, those who are looking ahead should discern that we are at, or near to, the beginning of a new residential property cycle - if not right now then imminently through the summer months ahead.

Don't allow the muddy water from the dark days to obscure your vision of the decent prospects that lie ahead.

Constantly waiting to achieve a result that balances the gloomy loss-making past with a favourable outcome now has been a mistake that has been made by every seller I've met in this situation.

It will cost them more in reality down the line than cutting losses now and moving forward positively.

Author: Ronald Ennik

Submitted 03 Oct 19 / Views 132