Expect the unexpected from property in 2024

Wouldn’t it be great to know how our property markets are going to perform this year?

However my many years as a property investor have taught me not to try too hard to predict our markets year by year, but instead to take a long-term view, then allow for cycles around this long-term trend and be prepared for uncertainty, surprises and the unexpected.

In other words, make a plan and expect your plan not to go to plan.

Having said that I see 202 as the year when property values in our major capital city markets will end the year 6-8 percent higher than at the beginning of the year.

The market moves in cycles

It’s important to understand that cycles are a continuing feature of the economy and investment markets and anyone who ignores those cyclical swings does so at their peril.

Yet investors have a tendency to perceive risks as being at their lowest during booms when the cycle has almost peaked.  

That’s because the media is full of stories about amazing profits, television shows on real estate abound and friends and family are all a buzz with tales of great gains that have been made.

Of course, when property prices are breaking new highs there’s a very good chance that sooner or later they’re going to slow down or turn in the other direction.

Similarly, many investors believe the risks are highest when the markets are down and prices have dropped like they have over the last year.

At these times the media tends to report the doom and gloom stories of people losing money and these often sap investors’ confidence.

Of course, the reality is that property slumps are often the best time to snap up bargains while prices are cheap.

Also, it’s also more likely that prices will rebound and grow from their low points, whereas there’s not as much room for growth if you buy at historical highs.

Now I remember that 12 months ago, in early 2023, I said that 2023 was going to be the year our property markets reset  present.

And that forecast was spot on - in fact I was surprised did Brazilian and strength of our housing markets, despite multiple interest rate rises.

Why do these cycles keep recurring rather than finding a nice equilibrium?

Economic cycles exist because we're human and affected by the optimism or pessimism of others.

The world economy is a collection of many nations, each at its own individual point in the economic clock.  

And every nation is made up of millions of people like you and me, each making our own financial decisions in reaction to, or in the expectation of, other people’s decisions.

The sheer momentum of all these economies means that they are always over-swing the mark and then correcting themselves, resulting in cyclical economic movements.

Waves of optimism and pessimism sweep the community driving investment cycles and the property cycle.

Investment markets, being forward-looking, are driven by expectations and sentiment as well as fear and greed and that’s why cycles will always be with us.

The pendulum swings too far

During booms property markets get ahead of themselves and grow too fast and they remain flat for longer than needed in slumps.

In today’s connected society, with the media feeding us a continual conveyor belt of messages, our mood swings seem wider and the cycle seems shorter.

Haven’t we learned anything from the past?

Well some of us have.

I’ve often said you must invest through two complete property cycles to become a sophisticated investor.

However, some people just don’t learn from their mistakes and keep getting carried away by their emotions or fears.

Then every seven to 10 years or so there is a new generation of investors who enter the market.

These beginning investors haven’t had the opportunity of learning the lessons of history and tend to drive the next property boom and this ensures the cycle continues.

But there’s more to it than that…

Watch out for the unexpected.

In the early 80s – long before there was a TV show of the same name - economist Dr Don Stammer taught me to watch out for the “X Factor”.

He said we need to allow for uncertainty and surprises.

These X factors are powerful influences on the economy and investment markets that had not generally been expected but which, for a time, have a marked effect on them.

They can be from an international source (such as falling oil and commodity prices) or a domestic one (like the uncertainty surrounding the government fiddling with GST or negative gearing.)

X factors can be negative such as the world shock after September 11^th or the near meltdown of the world banking system in 2008 for reasons that happened on the other side of the globe. 

At other times they have a positive effect on our economy such as Australia’s resilience to the Global Financial Crisis because of the demand for our resources from China or the drop in interest rates over 2020 and 2021 which led to a once-in-a-generation property boom.

These X factors affect the economy at large, which of course affects our property markets, but our property markets also have their own specific X factors – unforeseen events that affect the best-laid plans and predictions.

The lesson is while it’s important to take a long-term view of the economy and our property markets, you also need to allow for uncertainty and surprises by only holding first-class assets diversified over a number of property markets and having patience.

Understanding the cyclical nature of our property markets, the fact they overshoot and that an X factor can come out of the blue to thwart my best plans makes me a more cautious investor.

Examples of X-Factors:

In 2016 one of the X Factors was 2 interest rate drops when many thought the easing cycle was over.

Other significant X-Factors on the world scene were Brexit and the election of Donald as president of the USA.

One of the X factors in 2015 was APRA’s regulations restricting lending to property investors, causing many to have to review their borrowing capacity in a way they had not foreseen.

Further X factors in 2105 were 2 interest rate drops in the first half of the year when 12 months beforehand economists were predicting rates to rise.

Trying to predict the X-factor is futile: if it’s been predicted, it’s not the X-factor; but let’s have a look at a list of past major X-Factors from Dr Stammer, who now writes for The Australian.

The X-factor files:

2023: Multiple rapid rises in interest rates by the RBA to quell inflation - more than most expected and this had a significant effect on many Aussie's household budget

2022: The war between Russia and Ukraine fuelling worldwide inflation

2021: The fracturing of the long-dominant view low inflation is here to stay

2020: The fallout from the COVID pandemic.

2019: The surprise Federal election win  by Scott Morrison that gave confidence to  property owners

• Also read:The Mirage of Overnight Property Millionaires: Distinguishing the Skilled from the Lucky
• Also read:Latest property price forecasts for 2025 revealed. What’s ahead in our housing markets in the next year or two?
• Also read:This week’s Australian Property Market Update – Latest Data, State by State November 26th 2024
• Also read:Melbourne property market forecast for 2025
• Also read:Sydney property market forecast for 2025

2018 The impact of the royal commission on financial services

2017 The positive macro influences that, globally, restrained volatility, boosted shares and kept bond yields low

2016: Brexit and the election of Donald Trump as president of the USA

2014 Falling worldwide oil prices due to severe tensions in the Middle East.

2011 Continuing problems with European government debt

2010 European government debt crisis begins

2009 The resilience of our economy despite the GFC

2008 The near-meltdown in banking systems -the GFC

2007 RBA raises interest rates 17 days pre-election

2006 Big changes to superannuation

2004 Sustained hike in oil prices

2001 September 11 terrorist attacks

1997 Asian financial crisis

1991 Sustainable collapse of inflation

1990 Iraq invasion of Kuwait

1989 Collapse of communism

1988 Boom in world economy despite Black Monday

1987 Black Monday collapse in shares

1986 “Banana Republic” comment by Paul Keating

1985 Collapse of $A after MX missile crisis

1983 Free float of the Australian dollar

Now it’s your turn to play the game and predict the coming year’s X-Factor.

What does this mean for you?

Of course…if you want to take advantage of the property markets in 2024 you’ll need to buy the right type of property.

One that has a level of scarcity, meaning they will be in continuous strong demand by owner-occupiers (to keep pushing up the value) and tenants (to help subsidise your mortgage); in the right location (one that has outperformed the long-term averages), at the right time in the property cycle (that would be now in many states) and for the right price.

To become a successful investor you will need to surround yourself with a team of independent and unbiased professional advisors (not salespeople) – a team of people who are known, proven and trusted, so it is probably appropriate to remind you that in changing times like we are experiencing, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi-award-winning team at Metropole have no properties to sell, so their advice is independent and unbiased.

And you'll need to have a Strategic Property Plan using proven frameworks.

You need to plan

So while the property markets will create significant wealth for many Australians, statistics show that 50% of those who buy an investment property sell up in the first five years.

And of those who stay in the investment game, 92% never get past their first or second property.

That's because attaining wealth doesn’t just happen, it’s the result of a well-executed plan.

Planning is bringing the future into the present so you can do something about it now!

Just to make things clear...buying an investment property is NOT a strategy!

It's important to start with the end game in mind and understand what you need and what you want to achieve.

And then you have to build a plan, a strategy to get there.

The property you eventually buy will be the physical manifestation of a whole lot of decisions that you will make, and they must be made in the right order

That's because property investment is a process, not an event.

If 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, I suggest you allow the team at Metropole to build you a personalised, customised Strategic Property Plan

When you have a Strategic Property Plan you’re more likely to achieve the financial freedom you desire because we’ll help you:

• Define your financial goals;
• See whether your goals are realistic, especially for your timeline;
• Measure your progress towards your goals – whether your property portfolio is working for you, or if you’re working for it;
• Find ways to maximise your wealth creation through property;
• Identify risks you hadn’t thought of.

And the real benefit is you’ll be able to grow your wealth through your property portfolio faster and more safely than the average investor.

Click here now and learn more about this service and discuss your options with us.

By the way, an audit of the results of our clients at Metropole showed they were 7.3 times more likely to own 6 or more investment properties than the average Australian investor.

I guess they made the right decisions becuase they were given the right advice.

Your Strategic Property Plan should contain the following components:

1. An asset accumulation strategy
2. A manufacturing capital growth strategy
3. A rental growth strategy
4. An asset protection and tax minimisation strategy
5. A finance strategy including long-term debt reduction and…
6. A living off your property portfolio strategy

Click here now and learn more about this service and discuss your options with us.