Over three hundred years ago Newton established a law of motion stating ‘an object either remains at rest or continues to move at a constant velocity, unless acted upon by an external force’.
Of course, he was not speaking about financial markets or the value of assets but I would argue that this law applies.
Now that we have confirmation of increasing property prices both from the HBIndex as well as the Czech Statistical Office we will see the momentum continue to grow.
Price decreases can damage buying trends as Apple knew in 2007 with the iPhone.
One reason it is so difficult to move prices off a bottom is that no one wants to be taken for a sucker. What do I mean?
We all know the awful feeling of purchasing something and then seeing it go on sale the following week for 1/2 price. In fact this is such a negative experience that many big companies will give existing clients some sort of bonus or rebate if they reduce their prices on a product or service. An example of this was in 2007 when Apple reduced the price of their iPhone from $599 to $399 and offered a $100 in-store credit for those who paid the original price.
With property prices in Czech Republic, now that we have confirmation that prices are moving off the bottom, all those with deflation fear will move from the sidelines and give further impetus to the market.
Applying Newton’s law of motion, the most force was needed to get prices moving but now that they are, it will require less effort to keep them in motion. I personally expect to see slow acceleration.
For more information about what we expect real estate prices to do this year please see our 2014 Czech property forecast or contact me directly at: [email protected].
Updated/Aktualizováno: November 27, 2014,
