Expert Advice with Doron Peleg 01/09/2017
Men are risk-takers; women are cautious. Men are tempted by ‘get rich quick’ schemes and marketing ploys, while women look for long-term performance. New research by RiskWise Property Review reveals surprising insights into the mindsets and motivations of female and male investors.
Typically, RiskWise’s research revolves around supplying investors with macro economic trends and key growth data. However, when recent studies revealed women are ‘better’ Wall Street investors than men, we decided to ask the question: does the same hold true in real estate too?
Are women really better property investors than men? And if so, why?
Before beginning the study, we defined the characteristics of a successful property investor as one who has a long-term investment strategy, takes low risks and generates high capital growth through a defined strategy and independent research.
The results were unexpected, and revealed astonishing realities about the way men and women are influenced in their property purchase. Here is what we discovered:
Women are more aware of risks and seek tools to manage it; men tend to ignore it
Our clients use RiskWise for independent, top quality research services to locate areas with minimal risk and an expectation of solid return. Essentially, they want deeper insights so they can make smarter decisions. As a company, we have never specifically targeted gender in any of our marketing.
However, we discovered that 58% of our website traffic was generated by women – in particular, professional women between the ages of 25 to 44. This is particularly interesting because it fits the rising trend of young women taking more control of their financial future through real estate.
Women’s interest in risk and mitigation strategies was 38% higher than men, who demonstrate a lower level of risk awareness. In fact, studies have shown men have a higher tendency to gamble and that they are overconfident and immodest. This is a concern in the property market, where high-risk ventures can have devastating consequences.
Women search for low risk and long term sustainable capital growth; men are more likely to invest in a 'hot spot' and 'get rich scheme'
To understand the differences in decision-making processes, we researched ‘hot spot’ investments – investments that RiskWise’s historical research has shown are a poor investment strategy.
We collected data from the property professionals who facilitated hundreds of investment transactions in Queensland’s booming mining towns in 2011 and 2012. Many of these properties have since busted with the industry downturn.
The data confirmed that the vast majority of the decision-makers in these ‘hot spot’ investments were men.
One professional commented that “in 2012 men were significantly more likely to think that an investment in a mining town in central Queensland is a better investment than units in the middle ring of Sydney”.
Men are more easily manipulated
Free educational seminars are designed by real estate spruikers to sell off-the-plan – and often low performing – new properties. Many of them are high on the RiskWise 'off-the-plan Danger Zones’ list.
Women are more likely to recognise the truth of the situation – that they are not the client at a free seminar, and in fact the seminar organiser likely works for a property developer and has a contractual obligation to sell the properties for the highest possible price.
Men, on the other hand, are more likely to be swept up in the hype and believe that they are the client, and that the organiser of the free seminar will truly act in their best interests.
Property marketers also use enticing advertising to appeal to men’s visual senses. For example, it’s common practice for female models to be hired to stand beside professional sales people at property expo’s.
We undertook a study of the real estate agents who hired models in the last several years. Typically, the models increased the traffic to their booth by 50%-100%, with a similar increase in the rate of high quality sales leads, many of which converted into transactions.
It was noted by these real estate agents that even a short absence of the model resulted in an immediate and significant decrease in traffic to their booth.
One of the presenters we spoke to commented, “you can sell anything to men – you just need a beautiful model who lures them in, has some small talk with them, and our polished sales people take it from there all the way till they close the deal”.
Women check the facts, men can be easily swayed by opinion
Being generally more risk-averse, women validate any property information they receive with an external and independent source.
Men are more inclined to search for validation of a pre-conceived idea. Even when presented with formal research, complete with data and analysis which clearly reveals the risks, men have a tendency to brush aside facts.
At RiskWise, we have personally witnessed some prime examples of this mindset at work. A male investor was told by a real estate agent that an investment in a unit in Southbank Melbourne – a location deemed too high risk for several major lenders due to potential oversupply – was sound because “everyone wants to live on the water walking distance from the CBD”.
We provided the investor with our research, which confirmed the potential risks. Without hesitation, he repeated the information given to him by the real estate agent, despite the facts in hand.
The second example involves a couple who migrated to Australia and had never had any dealings with property. The female partner was more knowledgeable overall, but asked for more definitive research. The man, on the other hand, had a very clear idea regarding where to invest – based largely on media chatter - and he was very confident that he did not need any research.
The final analysis: why women make better property investors than men
We said in the beginning that a successful investor is one who follows a strategic process and backs up action with independent research. Women have a natural tendency to operate in this fashion, which protects them from high risk and increases their chances of investing with long-term success.
The risk of failure increases when the decision-making process is driven by flashy advertising or big numbers. Men, by nature, are more likely to follow a gut feeling rather than facts and research. As a result, men are in greater danger of being lured in by industry hype and ‘sure bets’ than women are.
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Doron Peleg is the CEO/Founder of RiskWise Property Review, a Co-Founder and Managing Partner of 'PELEG, KESSEL & CO' and a former Executive Manager at Westpac.
Utilizing 20 years of experience in risk management, Doron has Co-developed RiskWise's property risk rating algorithm. This smart algorithm enables potential property investors to better access and mitigate risks for individual propertues in Australia.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.