This has puzzled me for quite some time now. If you genuinely believe in the fundamentals of a certain asset, then surely a market correction represents a buying opportunity?
For example, I believe strongly in the fundamentals of gold and some other commodities. Occasionally a speculative bubble will emerge in such commodities, the price will shoot up beyond a fair price reflecting fundamentals. After a period, the bubble collapses and the price drops. As is the nature of markets, the price correction tends to be too severe and it falls below the fair value for the commodity. This presents a fantastic opportunity to purchase said commodity at a discount to its fair price.
Why then do property bulls, who maintain that property is not overvalued, not welcome a correction? Although a 50% drop in current market price means a drop in the worth of their existing property portfolios it also presents them with a chance to snap up some undervalued property. When market prices return to a fair reflection of their worth, based on all those fundamentals we keep hearing about (sound economy, immigration, future appreciation etc.), they'll be coming out well ahead.
Instead, the response is positively hostile. Much talk of "it'll never happen here" or "prices will continue to climb etc.". What I haven't heard anyone say is: "well, I think houses are fairly priced based on sound fundamentals, if there is any kind of a correction I will consider it a huge buying opportunity."
Just thought it was curious. Perhaps even the property bulls don't believe their own hype?
For example, I believe strongly in the fundamentals of gold and some other commodities. Occasionally a speculative bubble will emerge in such commodities, the price will shoot up beyond a fair price reflecting fundamentals. After a period, the bubble collapses and the price drops. As is the nature of markets, the price correction tends to be too severe and it falls below the fair value for the commodity. This presents a fantastic opportunity to purchase said commodity at a discount to its fair price.
Why then do property bulls, who maintain that property is not overvalued, not welcome a correction? Although a 50% drop in current market price means a drop in the worth of their existing property portfolios it also presents them with a chance to snap up some undervalued property. When market prices return to a fair reflection of their worth, based on all those fundamentals we keep hearing about (sound economy, immigration, future appreciation etc.), they'll be coming out well ahead.
Instead, the response is positively hostile. Much talk of "it'll never happen here" or "prices will continue to climb etc.". What I haven't heard anyone say is: "well, I think houses are fairly priced based on sound fundamentals, if there is any kind of a correction I will consider it a huge buying opportunity."
Just thought it was curious. Perhaps even the property bulls don't believe their own hype?
