New research suggests that property investors may hold onto an asset in a declining market for longer than they should out of fear of making a loss…
Such a decision can be especially financially damaging for highly leveraged investors who bought at the peak of the market with the expectation that prices would keep rising.
Another view is that as long as they can hold onto the property, there will likely be another lift cycle where prices will go beyond previous highs. Australia in general and certainly the major cities have tended to swing on a 5 – 7 year cycle.
In June’s Journal of Economic Psychology, Dr Daniel Richards, lecturer of Wealth Management at RMIT University, found that investors often held on too long in a falling market due to feelings of regret. Although the research focused primarily on investors in the stock market, Dr Richards said the findings held true for property.