Investing is a thinking game. It is not a physical challenge, but rather a vision of the world imposed on the landscape. It is a combination of temperament, experience and feedback from others that allows the person to identify and deliver a curated series of offers for the individual customer. It is a step away from the herd, and is part of the mental mosaic that forms the fundamental principles of the person.
This is why, curiously, despite the rise of technological disintermediation and that of discount brokerages, commissions have actually increased. But they are not available to everyone. Rather, these bespoke commissions offered are for those who bring what Warren Buffett calls the “Money Mind” into the equation. Regardless of ticket size, these outsized commissions were available to a select few who recognized the discipline of compounding money and how difficult it is when prices are at high levels.
In a rapidly urbanizing city like Dubai, where the emphasis has been on primary market sales, there has always been an incentive for the middleman to direct the buyer to these offers. Many even bought for themselves in periodic bouts of speculative frenzy. But it was in the secondary market that the broker earned its praise.
Whether it is to identify a primary or secondary residence or for investment purposes, the real intermediary has always been the one who is able to channel the investment philosophy in a way that is profitable, accretive and not easily accessible in price terms. Once these variables are identified, the journey has only just begun because next comes the “waiting game” – a discipline of patience that is necessary for wealth to accumulate. As interest rates rise for the first time in two decades, the new investment landscape almost certainly ensures moderate price curvature and a more restrained appetite for mortgages.
Yet, for intermediaries, this represents opportunities rather than obstacles. For the investor who seeks to delegate, a number of principles have been issued by the advisers in terms of the qualities to be sought. The “Money Mind” mindset is looking for just one – identify a broker who has already invested in a property for the long term rather than for churn purposes. This attribute alone will narrow the list of potential candidates down to a handful of qualified professionals.
A survey conducted showed that more than 90% of potential buyers have turned to the Internet for their next real estate purchase. The role of technology is unquestionable. Curiously, the principles of investing have eroded as the ‘churn and burn’ model has taken root.
Looking at Land Department data, the outsized commissions paid were not just done through the technology platform, nor were they exclusive to the most expensive items. Rather, there has been a concentration among a select few individual entities in the secondary market, which have chosen to keep their successes quiet. German-born philosopher Dietrich Dorner describes the damaging thought patterns plaguing modern society in his book “The Logic of Failure.”
Failure develops gradually from its own logic. For the intermediary as for the investor, the conclusions are clear: to move away from the herd is a pitfall that few can avoid. But they do exist and walk among us. The choice of intermediary is therefore as critical (if not more so) than the asset itself.