2018 looks set to be a very interesting year for property

One minute read  

I want to get three things off my chest. 

I think they are important.

They are relevant, given recent and pending events.

These three things are growth, debt and illiquidity.

Bear with me, this will only take a minute.

1. Growth

We are hooked on growth; fixated by it.

All last week and over the weekend, it was ‘growth this and growth that’. 

Gross domestic product, or 'GDP', is a proxy for a country’s output and our GDP growth has been remarkably consistent over recent decades.

But few stop and ask why?

GDP measures two types of growth – genuine and artificial.

The first is good and the second type of growth is bad, especially in large or prolonged dosages.

Genuine growth is largely driven by an increase in real productivity and a bigger sustainable market.

Bad growth is primarily driven by increasing amounts of debt being injected into the economic system.

All growth has its limits, but more so for the artificial kind.

2. Debt

Debt is consumption brought forward.

Growth is the assumption that consumption will continue.

Revisit the section above.

3. Illiquidity 

When lots of speculators buy an illiquid asset, the price often rises exponentially.

The top is very hard to call and the opposite always applies when the market downturns, goes sour or when supply exceeds demand.

Also, the rules can change.

This applies to many things including cryptocurrencies and real estate.

End note

So, we must have growth at any cost; need to continue borrowing to get it and are brainwashed into believing that there will be blue sky forever.

2018 looks set to be a very interesting year.

About Michael Matusik Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive