The evidence is overwhelming that we know much less than we think we do, even when we’re armed with all the data and reports.
Sometimes especially when we’re armed with data and reports, because it gives us a false sense of confidence.
Just look at some of the headlines that have come out so far this year:
- The boom is over for the Sydney property market– reported last week.
- Sydney property prices rising – reported this week.
- Here are the hot spots for 2017 – I get an email like this almost every week!
The problem is investors tend to read and believe what they want to – it’s called confirmation bias.
This is the psychological phenomenon that explains how people tend to seek out information that confirms their existing opinions and overlook or ignore information that refutes their beliefs.
Confirmation bias can thus cause investors to make poor decisions, and explains why markets don’t always behave rationally, as it is a source of investor overconfidence.
So let’s step back from all the hype and look at what really happened over the last year and see if we can extract some lessons for 2017.
FIRSTLY, HERE ARE THE LATEST NATIONAL STATS:
Source: Corelogic
The markets are fragmented
What these figures don’t really show is how fragmented the markets really are.
Even though our property markets lost their oomph as last year progressed, some properties are still selling well and increasing in value while others aren’t.
For example, what I call “investment grade properties” in the middle price range (say $500,000 – $850,000), in prime locations and with an element of scarcity, are still selling well, even though there is clearly less interest from both owner occupiers and investors than there was before.
However, “B” & “C” class properties are not selling well.
Some have dropped in value by up to 10% and some can’t be given away (well…it’s not really as bad as that, but you’d have to give a very steep discount for someone to buy them).
While the market has only just begun to be tested this year, the key indicators suggest this slow down will continue well into 2016.
EXPECT THE UNEXPECTED IN 2017 
If our property markets taught us anything over the last few years, it is to expect the unexpected.
Of course I don’t know what this will be but it’s likely to be in the realm of finance.
We have already seen the biggest lender in Australia pull out from lending to new property investors and there are rumours that other banks, straining under the burden of taking over these loans, will also buckle and restrict lending.
In the past it has been finance this is brought an end to previous property cycles – either through rising interest rates or a credit squeeze.
What will bring an end to this property cycle?
This is something I have been turning a lot of my attention to as has our research department and my professional colleagues.
And this is exactly the type of information I’m going to share with attendees at my upcoming one day trainings – my Property Market and Economic Updates around Australia in the next few weeks.
If you haven’t yet booked in click here now, find out all about these sessions and reserve your seat.
As I said… I’m going to share with you what I think is going to happen to the Australian property market, and will have expert commentary from Dr Andrew Wilson, chief economist of Fairfax owned domain, who in previous years has always wowed our audience with his market insights.
Click here now to find out all about these trainings and reserve your place now
Interestingly high property values on their own won’t end the property cycle.
There will need to be a precipitating factor to end this cycle.
And while exactly what this is and when it will occur is unknown, I have identified five possible precipitating factors that could end this property cycle and will be explaining these in detail at my upcoming trainings.
Please click here now and reserve your place and learn how to maximise your upside while minimizing your risks and protecting your assets from my faculty of experts.
And of course, since we have no properties for sale, our recommendations are unbiased and independent.
5 PROPERTY LESSONS FOR 2017
To ensure you don’t get burned in the coming year and to give you a chance to make the most out of our changing property markets, I would like to share some important lessons I’ve learned from previous cycles.
Probably the most important lesson we can all learn is to never get too carried away when the market is booming or too disenchanted during property slumps.
Letting your emotions drive your investments is a sure-fire way to disaster.
LESSON 1. BOOMS DON’T LAST FOREVER
During a boom everyone is optimistic and expects the good times to last forever, just as we lose our confidence during a downturn.
Our property market behaves cyclically and each boom sets us up for the next downturn, just as each downturn paves the way for the next boom.
Let’s face it…while the news is much less positive today, we know that over the next few years the flatter market conditions will be followed by another property boom and then another downturn.
And over the next decade we’ll have another recession (we have one every seven to 10 years) and we’ll most likely have another depression one day.
The lesson from all this is get prepared for the next phase of the property cycle.
During the last cycle, most investors didn’t really have their upsides maximized or their downside covered.
LESSON 2 – BEWARE OF DOOMSAYERS.
For as long as I have been investing, and that’s over 40 years now, I remember hearing people with excuses why property prices will stop rising, or even worse, why property values will plummet.
However in that time, well located properties have doubled in value every 10 years or so.
Fear is a very powerful emotion, and one that the media used to grab our attention.
Sadly some people miss out on the opportunity to develop their own financial independence because they listen to the messages of those who want to deflate the financial dreams of their fellow Australians.
Fear is a very powerful emotion, and one that the media used to grab our attention.
Sadly some people miss out on the opportunity to develop their own financial independence because they listen to the messages of those who want to deflate the financial dreams of their fellow Australians.
LESSON 3 FOLLOW A SYSTEM
Smart investors follow a system to take the emotion out of their decisions and ensure they don’t speculate.
This may be boring, but it’s profitable.
Let’s be honest, almost anyone can make money during a property boom because the market covers up most mistakes.
But many investors without a system found themselves in financial trouble when the market turned.
Warren Buffet said it succinctly: “You only find out who is swimming naked when the tide goes out.”
In other words, if you aren’t following a system that works in all market conditions you will be caught naked when the market changes.
If you prefer to have consistent profits and reduced risk, follow a proven system.
Make your investing boring, so the rest of your life can be exciting.
LESSON 4. GET RICH QUICK = GET POOR QUICK
Real estate is a long term investment yet some investors chase the “fast money.”
You’ve probably met people like that – they look for that deal that will make them fabulously rich.
When you see them a year later, they’re usually no better off financially and still talking about the next deal that will make them rich.
They are often influenced by the latest get-rich-quick artist with a great story about how you can join them and become stupendously wealthy.
Their stories can be very compelling, even hard to resist.
They often pander to the wishes of people who would like to give up their day job to get involved in property full time, but in reality it takes most people many years to accumulate sufficient assets to do this.
Patience is an investment virtue.
Warren Buffet said it right when he explained that: “Wealth is the transfer on money from the impatient to the patient.”
LESSON 5. IT’S ABOUT THE PROPERTY
You’re in the business of property investment, yet during the last boom many investors forgot the age-old property fundamentals of buying the best property they could afford in proven locations.
Instead they got sidetracked by glamorous finance or tax strategies and some lost out.
Smart investors do it differently.
They make educated investment decisions based on research and buy a property below it’s intrinsic value, in an area that has above average long term capital growth and then add value creating some extra capital growth.
These are just 5 of the many lessons that I learned investing through previous property cycles.
The markets are slowing down, but they’re not in reverse – they’ve just slipped form fifth gear to second gear.
We know that over the last few years ago the pendulum swung too far in some regions and the markets are catching their breath.
In some areas property prices are flat and in others they have fallen and will continue to languish for a while.
We also know that if history repeats itself, some markets will swing too far into the negative, driven by fear.
If you learn these lessons from previous cycles the roller-coaster ride will not be as dramatic this time around because you won’t let your emotions drive your investment decisions.
Remember both fear and greed will drive you down the wrong path.
A year of uncertainty ahead
I started this blog by explaining that no one really knows what lies ahead, but there are some amazing similarities to one previous cycle – one I remember very well.
Boy I wish I knew then what I know now!
Click here now and get all the details of my upcoming Property market and Economic 1 day trainings, reserve your place and….
- Learn some new information – I’m presenting some new ideas and the markets are very, very different to last year.
- Reinforce some thinks you already know.
- Gain some distinctions – just to fine tune how you’re doing things.
I am keen to help you protect your assets and maximise the return of your property portfolio, so I look forward to seeing you at this event.
from Property UpdateProperty Update http://propertyupdate.com.au/admit-one-really-knows-whats-going-property-markets/
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