What is a recession, and are we in one?
This was a hot topic at the tail end of 2022, with the majority of leading economists forecasting a recession in the global economy in 2023, according to a survey carried out by the World Economic Forum (WEF) in November-December last year. But, what exactly is a recession, and are we actually in one? Well, a recession is defined as a significant, widespread, and prolonged downturn in economic activity. As a general rule of thumb, two consecutive quarters of negative gross domestic product (GDP) growth would mean, technically we are in a recession, though this has yet to be confirmed. The next ONS Business Insight report is scheduled to be released on 26 January 2023.
While a recession may be a frightening prospect, it doesn’t have to spell total doom and gloom for property investors or homeowners. With a few smart strategies and proactive measures, you can protect your investments from panic selling or catastrophic losses when the market takes a downturn – and set yourself up to emerge strong once the economy recovers. In this blog post, we’ll provide insight into how you can safeguard your property investments during an economic recession.
Know Your Market
The key to safeguarding your investments during an economic downturn is to know your market inside and out. Understand which industries are most affected by recessions, which areas are most affected by job losses, and also keep track of any changes in demand for certain types of properties or locations. Armed with this knowledge, you’ll be able to make informed decisions about how to best adjust your strategy should a recession hit.
Which industries are most affected by recessions?
Recessions can have a huge impact on industries across the world. In the UK, some of the industries that are always most affected during recessionary periods are hospitality and tourism, retail, construction, finance and insurance, and private education. This is because these industries all rely heavily on consumer spending for their success. When recession hits, people tend to hold off on spending too much money, which in turn has a negative effect on those businesses in these industries. It can take some time for businesses to recover from the economic downturn following a recession, so finding ways to stay afloat during recessionary periods is essential for these markets to prevent permanent closures.
Plan Ahead
If you’re planning to invest in property long-term, it pays to plan ahead for potential economic recessions. Consider diversifying your portfolio across multiple markets so that if one area takes a hit due to job losses or other factors, you won’t necessarily be left with no options. Keep track of current tax laws so you understand what deductions will still be available should the worst happen. And finally, think carefully about where and when you choose to invest – not all properties will remain stable during an economic downturn. If you’re still unsure, it is always a good idea to speak to a professionally trained financial advisor.
Understand Your Financing Options
Being aware of your financing options before investing is critical if you want to protect yourself from losses during an economic recession. A drop in interest rates means a smaller return on savings. However, as interest rates continue to drop, this means cheaper lending borrowing costs, and lower mortgage monthly repayments. It may be wise to switch over from fixed-rate mortgages since they tend not to adjust accordingly with market fluctuations. It’s also important to consider refinancing options should rates drop too low for your liking; talk with lenders about what options may be available prior to investing so that you’re prepared should the need arise later on down the road.
Manage Your Risk
One of the best ways you can protect yourself from financial loss during an economic recession is by managing your risk wisely. Investing in low-risk properties such as multi-family homes or commercial buildings can help shield you from some of the volatility associated with residential properties– but these types of investments come with their own unique risks as well so make sure you thoroughly research them before making any decisions! Finally, make sure that any loans taken out have appropriate insurance coverage just in case something goes wrong; this will help mitigate any potential issues if things don’t go as planned down the line.
Will you be able weather a financial Storm?
6 Ways Forbe Says You Can Survive an Economic Downpour
- Prepare for a job loss – Update your CV, LinkedIn profile, reach out to your networks.
- Learn a new skill – It’s never too late to learn a new skill. Udemy is a great place to start.
- Cut back on unnecessary spending – This may be hard to do, but start small e.g. downgrading subscription plans.
- Multiply your source of income – Upskilling is the first step, putting it into practice is the next.
- Don’t panic buy or sell – Probably one of the worst things you could do. Making uneducated guesses when it comes to investments is a dangerous game to play, and could lead to surmountable financial losses.
All in all, it’s important to pay attention and be prepared if we do enter a recession. A proactive approach from investors and homeowners can help protect their investments from the economic risks of such an event. To make sure you’re getting a fair deal on your next property purchase and to be ahead of the curve for whatever the market brings, sign up to Properkeys Limited’s services. They offer insight into below market value properties which could prove invaluable in seeking out potential profits despite any downturn in the economy. Not only that, but with their expertise you won’t have to worry about being at the mercy of market conditions – your investments will have already seen every available angle before they land on your table. Investing is always a gamble but by making use of services such as Properkeys Limited you can face that risk head-on and equip yourself with the right information to thrive even during a recession.
