5 Lessons I’ve learned from past property booms

Property markets around Australia are moving to the next phase of the property cycle after experiencing a year or so of a cyclical downturn.

But we're not in for a property boom any time soon - we're entering the stabilisation phase of the property cycle.

I've invested through the ups and downs of the property cycle for over 5 decades and it would be a pity to have lived through those challenging times without learning some lessons so that we are not destined to repeat the pain.

Remember that property boom of 2020-21?

What did you learn from that last property boom?

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 surefire way to disaster.

To ensure you make the most of our changing housing markets let’s look at 5 big lessons I’ve learned about property booms in my close to 5 decades of investing.

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 property markets around Australia are moving to the next upturn phase of the property cycle, we know that at some time in the future the market will boom again and then the buoyant market conditions will be followed by a property slow down and the value of some properties will slump or fall.

And then the cycle will move on and will have another boom.

And over the next decade or two, we could even have a recession and we may even have another depression one day.

The lesson from all this is that even as you take advantage of our booming markets, get prepared for the next phase of the property cycle.

During the last cycle, most investors didn't really have their downside covered or their upsides maximized.

Lesson 2 - Beware of Doomsayers

As long as I have been investing 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 doubled in value every 8 to 10 years.

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 proven 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 last time.

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.

This starts with having a Strategic Property Plan - this is just bringing the future into the present so you can do something about it now!

Whether you’re a beginner looking for a time-tested property investment strategy or an established investor who’s stuck or maybe you just want an objective second opinion about your situation, click here now and learn about how the Property Strategists at Metropole can build a customised, personalised Strategic Property Plan for you.

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 of 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 its 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 from previous property cycles.

If you heed these teachings the roller coaster ride will not be as dramatic next time around because you won’t let emotions drive your investment decisions... both fear and greed will drive you down the wrong path.

Promise yourself that as the boom rolls out you won't get too excited, then when the next downturn hits (and you know it will) you can just confidently smile because you will have made the most of our next property boom.

ALSO READ: Who are the Drivers of Property Booms and Busts?

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.