What can we expect to happen to our property markets over the next decade?
That’s a common question I’m being asked by both our clients at Metropole and various media sources now that we’re at the beginning of a new property cycle.
But I think I’m disappointing them with my answers because I tend to say something like “a lot will happen over the next decade, but I don’t make forecasts – instead I have expectations.
Now there’s a big difference between forecasts and expectations.
I expect there to be another recession in the next decade.
But I don’t know when it will come.
I expect that some investments I will make won’t do well.
But I don’t know which ones they will be.
I expect interest rates will rise. Probably not for a number of years. In fact, I don’t know when.
And I expect another world financial crisis.
But I have no idea when it will come.
Now these are not contradictions or a form of cop out
As I said…there’s a big difference between an expectation and a forecast.
An expectation is the anticipation of how things are likely to play out in the future based on my perspective of how things worked in the past.
A forecast is putting a time frame to that expectation.
Of course, in an ideal world we would be able to forecast what’s ahead for our property markets with a level of accuracy.
But we can’t, because there are just too many moving parts.
Sure, there are all those statistics that are easy to quantify, but what is hard to identify is exactly when and how millions of strangers will act in response to the prevailing economic and political environment.
Then there will always be those X factors that crop up.
Those unforeseen events that comes out of the blue, which could be local or overseas that undo all the forecasts we made.
Just look at these two major events that have rocked the world in the first months of last year that no one could foresee coming.
- The terrible, tragic bushfires in Australia.
- The spread of Coronavirus from China around the world leading to a pandemic and a recession in many countries.
While I’m emphasizing the economic impact, I’m not in any way belittling the tragic human impact these unexpected events have had.
So what should you do about this?
I’ve found the most practical approach is to have expectations of what could happen without specific forecasts.
That’s because when you expect something to happen at some stage in the future, you’re not surprised when it happens.
Expecting the worst while preparing for the best forces you to invest with room for error, and psychologically prepares you for the inevitable disappointments.
This is exactly how I planned for the property downturn of 2018-19 and why I was prepared for the recession of 2020.
I didn’t know when the property downturns would come, how long they would last or how they would affect the value of my property portfolio or the cash flow of my business.
But I knew a downturn would come once again, and I was prepared for it with cash flow buffers to see me through the difficult times.
What I’m trying to explain it that there’s a huge difference between, “I expect another next property downturn sometime in the next decade” and “I expect the next property downturn in the second half of 2025.”
One of the big differences is how I invest
If I expect the property upturn we’re currently experiencing will be followed by another property downturn, then I won’t be surprised when it comes.
But since I don’t know when this will happen, I won’t make the focus of my property investing trying to time the property cycle.
That’s because trying to time the property cycle or looking for the next “hot spot” are two of the reason many property investors fail.
On the other hand, strategic investors maximise their profits during property booms and minimise their downside during busts by investing in assets that have “always” worked, rather than looking for the next hot spot or for the type of property strategy that works “now.”
They own investment grade assets in investment grade inner and middle ring suburbs of Australia’s three big capital cities.
The type of property that keep growing in value over time without fluctuating wildly in price when the property cycle slows down.
If you’re looking at buying your next home or investment property and take advantage of the new property cycle here’s 4 ways we can help you:
Sure our property markets are improving, but correct property selection is even more important than ever, as only selected sectors of the market are likely to outperform.
Why not get the independent team of property strategists and buyers’ agents at Metropole to help level the playing field for you?
We help our clients grow, protect and pass on their wealth through a range of services including:
- Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family. Planning is bringing the future into the present so you can do something about it now! Click here to learn more
- Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property. Click here to learn how we can help you.
- Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
- Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.
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