One of the most common investor questions at the moment is “Should I delay buying because prices might fall?”
This, I have to say, is the reaction of someone who has little knowledge, does little or no research, and simply reacts to media soundbites.
As I’ve often said in the past, the first thing real estate consumers need to do, is …
- tune out all that media white noise,
- avoid that constant source of negativity and misinformation, and
- base your decisions on research and common sense.
It’s really important to think and act independently.
Unfortunately, most prospective investors don’t do a lot of research.
And they react to what they read and hear in mainstream media.
Essentially, they’re herd animals – and they join the stampede, whichever direction it happens to be running in.
Most people who bought in the up-cycle that started two years ago did so after hearing or reading that there was a boom happening and they became part of the FOMO syndrome.
The smart people had already bought property, well ahead of the boom and the stampeding herd.
Now the herd is moving in the other direction.
Herds are easily spooked and it only takes some alarmist media to set off a stampede in the wrong direction.
Most people, it seems, like the comfort of the herd – even when it’s running the wrong way.
I can’t emphasise this enough: no one ever got rich following the herd.
Those who succeed are usually moving in the opposite direction to the herd.
Warren Buffett, one of the wealthiest people on the planet, has a simple philosophy: buy when others are selling, sell when others are buying.
In other words, to be successful, when most people are zigging, you should be zagging.
Right now is a fantastic time to be a property buyer.
Many people are being spooked by rising interest rates and all the negative media.
Many markets are less competitive than before, so there are better buying opportunities.
At the same time, vacancies are the lowest on record and rents are rising like never before.
It makes a fantastic equation for property investors who are able to tune out the media white noise and see the opportunities.
Media keeps telling us that prices are falling across the nation but it’s simply not so.
None of data supports those headlines.
Recently the chair of PIPA, the Property Investment Professionals of Australia, Nicola McDougall said:
“In all my years of reporting on property markets and economic metrics, I don’t think I’ve ever seen such outlandish commentary as we have seen on the interest rate increases in recent months.”
I also saw the comments recently from Dr Andrew Wilson, one of the nation’s most experienced research analysts.
Wilson said that, what we’re currently seeing from mainstream media, is “a revisit to the clickbait house price crash headlines we’ve had many times in the past”.
Wilson points out the major banks, economists and the media generally made forecasts of horrific falls in house prices in 2018, when the previous boom in Sydney and Melbourne ended.
He notes that they were cleared wrong at that time.
Wilson also points out that the major banks, and other economists, again made similar dire predictions at the beginning of the pandemic in early 2020. And they were clearly very wrong again.
And he says: “The history lesson is clear. There is absolutely no foundation for these numbers about how much prices will fall. The fundamentals of real estate are still quite strong.”
I wholeheartedly agree.
Remember what the media was telling us around March/April 2020 when the pandemic first showed up in Australia.
We were told that prices would fall 20% or 25% – or, in one extreme forecast from Commonwealth Bank, 33%.
Imagine that. Prices dropping 33% across Australia. Nothing like that has ever happened in the history of the nation.
But lots of consumers believed those ridiculous forecasts, and decided not to buy.
They decided to wait until prices had fallen.
12 or 18 months later, prices had RISEN 20% or more – and those same investors very much wish they had taken action and bought back then as they had originally planned.
So, I urge real estate consumers not to make the same mistakes again.
There remain many strong growth markets in Australia.
The markets that ARE showing evidence of some decline are generally the top end suburbs of the biggest cities.
The more affordable markets remain solid to strong in many parts of country.
And many of our regional markets are still growing.
We are undoubtedly in a period of disruption, with weather events, covid outbreaks, high inflation and rising interest rates, which are impacting consumer confidence.
The SMART people will cut through all that – and see the opportunities.
They are the ones who will prosper in the future.