Half-Yearly Reflection: Property Market Lessons and Predictions for the Savvy Investor

The halfway mark of a calendar year is a good time to take stock of what’s happened during the first six months of the year.

Learning from the past is a key habit in helping us to navigate the financial challenges we’ll certainly face in the future.

It’s only by internalising these lessons that the mature investor can learn to say with confidence in the face of a crisis, “It’s never different this time.”

What’s happened

The 2023 story really starts in late 2022.

Affordability issues, rising interest rates and falling consumer confidence led to property values falling in 2022.

Investors were inundated with news about stubborn inflation, rising interest rates, an ongoing war in Ukraine, and fears of a coming recession.

Not surprisingly, consumer confidence was lower than it had been for decades.

And the usual group of “experts” kept telling us the property markets were in for further significant falls.

However, we now know that, overall, our housing markets bottomed out early this year and since then both house and unit values have risen around the country and rents have skyrocketed.

But the warning signs were there in late 2022 as the rate of the house market decline slowed down and asking prices (a great leading indicator to future sales prices) started rising.

What we’ve learned

While the exact market dynamics will never repeat, we know that they do rhyme, and so for the sake of our financial future, here are 3 lessons I believe are worth remembering.

1. Timing the market is a fool’s game.

The human mind finds it unavoidable to extrapolate current conditions into the future.

During a market downturn, we tend to assume that further declines are inevitable, just like investors are most confident during a boom when they should be more cautious.

However, knowing this and trying to time the market has been shown to be a futile exercise.

Warren Buffett has long been attributed to a quote that reads along the lines of:

"Be fearful when others are greedy and be greedy when others are fearful."

Investors interpret this adage as buying at the bottom (when others are fearful) and selling at the top (when others are greedy).

But that's not always the best property investment strategy.

I frequently meet investors who have missed out on a great opportunity because they were so consumed with timing the markets, they forgot to actually take the plunge and buy something.

Generally, these investors become obsessed with the idea of buying right at the bottom of a property cycle so they can secure a “bargain”.

While the stage of the property cycle should be considered when you are investing, it shouldn't form the entire basis of your decision.

In my experience, strategic investors do well at any time in the market cycle because they understand that it's time in the market that's more important than trying to time the market.

Property investing is dogged by dozens of different variables and although many property spruikers attempt to make it an exact science, the reality is that there will never be a ‘perfect’ time to invest or the ‘perfect’ property to buy.

That said, there are some principles that can be applied whenever you consider investing in real estate, to ensure that you are as comfortable as possible and exposing yourself to the least amount of risk.

2. The future is always uncertain

Every year brings its own set of crises and lots of reasons not to invest.

You can go back as far in history as you like and there won’t be a crisis-free year.

Sure some years are worse than others, but there is always bad news and much of it is unexpected.

Where investors get into trouble is that rather than focusing on their long-term goals, they see these crises as once-in-a-generation events that will alter the course of history, when in reality they are just the normal path of history.

And currently, there are many stories in the media telling us why our property markets are going to crash because of the "fixed interest rate cliff" or because we'll fall into recession– and in general, these are by the same people who made similar forecast a couple of years ago and were wrong then.

Sure our markets are facing headwinds, but contrary to the property pessimists they won't crash.

The extra half a million people who came to Australia in 2022 turned the supply and demand ratio on its head and these high immigration numbers are likely to continue for some years and at a time when we just can’t produce enough new housing stock.

These numbers will underpin our property markets and these migrants have to set up new households and that’s driving demand and fuelling our economy.

3. Proactive planning is the antidote

While I’m not really surprised about the housing market’s recent recovery, I really don’t know what the short-term future holds for global markets.

Indeed, I never will.

Unsuccessful investors are continually reacting to current events.

Our approach at Metropole is to remain steadfastly focused on our client’s long-term goals by proactively acting on a customised Strategic Property Plan that we build for them.

We’re confident that this approach will give our clients the best chance of lasting financial success because planning is bringing their future into the present so they can do something about it now!

This means that property our buyer’s agents eventually buy for them will be the physical manifestation of a whole lot of decisions that our clients have made make, and these must be made in the right order.

Looking ahead

The second half of 2023 will surely bring us new and different challenges.

However, I’m confident that no future challenge will be too much for our structured approach of giving strategic advice and planning to our clients at Metropole.

We will continue to plan for the long term and refuse to react to current events.

We will continue to deeply research the markets and only.

About Michael Yardney Michael is the founder 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.