As a research analyst on Australian housing markets, and a strong advocate of residential real estate as an investment, I always feel more optimistic when we are in periods of economic disruption – as we are right now.
Recent share market collapses have reinforced once again the relative safety of bricks and mortar – and provided a reminder that real estate often thrives in times of widespread economic disruption.
Recently Australian shares dropped to their lowest levels in months. Although many of those losses have since rebounded, we are undoubtedly in a period of volatility in share markets in Australia and worldwide.
Asian and US markets are going through periods of volatility as fears emerge of a looming recession.
While that’s not good news for those who have shares, it causes me to feel more optimistic about the future of real estate.
What we have seen, again and again, is that whenever there is major economic disruption with fluctuating fortunes on share markets, real estate often thrives.
The commentators will all come out of the woodwork and shout about property prices plummeting, but history has shown that the opposite usually happens.
People turn to real estate for solidity in times of crisis – because, in Australia, it never collapses dramatically the way shares sometimes do.
At the start of this Century, after 9/11 and the dot com crash, we experienced a major property boom in Australia between 2001 and 2004.
When the Global Financial Crisis hit in 2008, so-called experts predicted that property values would crash up to 40%.
What actually happened was that property prices surged as spooked investors poured their money into something they could feel and see.
As a result, Australian property prices rose throughout 2009 and 2010.
Media commentators and so-called experts often have short memories, so when the Covid pandemic hit Australia, we once again had predictions of massive property losses.
Wrong again. The result instead was a massive Australia-wide property boom with price increases unlike anything I’ve seen in my four decades of analysing real estate markets.
Economists always under-estimate residential real estate and fail to understand its major part in Australian culture.
Australians like real estate and they trust it.
They feel it is safe and solid, so it’s not surprising that when there is economic fear and uncertainty, Australians like to put their faith in bricks and mortar.
This latest blip in the share market and the ongoing solid performance of the real estate market gives me more faith that real estate will rise out of this and once again be that safe space that people can turn to with a degree of confidence.