Here’s why so many people are predicting a property market crash

The property market is going to crash!

That’s the type of headline the media has been using to draw you in, isn’t it? Fight Cynisism Choose Optimism

If they write something like “The long term property market fundamentals are sound”  it’s unlikley you would have bothered to click the link.
So have you wondered why are there so many property pessimists when long term optimism is the most realistic stance?

The media loves to tell us that the property market will crash and gives plenty of air time to commentators with this view.

Now there’s nothing new about this.

In fact part of this is natural — we’ve evolved to treat threats as more urgent than opportunities. 

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Warren Buffett wisely said: “In order to succeed, you must first survive.”

But all the pessimism about our property markets and the economy takes things to a different level.

I’ve found that if you say there’s going to be a property downturn and you’ll get retweeted.

If you say we’ll have a big downturn and newspapers will quote you.

But if you say we’re nearing the next G.F.C. and that property values will fall 40 percent and you’ll get on Television.

However, if you mention that good times are ahead, that certain property submarkets will finish the year higher than they started, or that our property markets are not going to crash, a common reaction from commentators and spectators alike is that you are either a salesman or you don’t understand the true risks.

Here are 3 thoughts about what’s going on here.

1. Money is universal

So if something bad happens it tends to affect everyone, albeit in different ways.

Recession PropertyNow that isn’t true of, say, the weather. A hurricane barrelling down on far north Queensland poses no direct risk to 95% of Australians.

But a recession barrelling down on the economy could impact every single person – including you, so you pay attention.

And of course, this also applies to the property market where around seventy percent of Australian households own or are paying off their home.

2. Pessimism requires action

Bad new means you may have to sell, or run away, or hide!

On the other hand, optimism is mostly a call to stay the course. It’s not nearly as urgent.

3. There’s a lot of money to be made in the property advice industry

Currently there is no regulation of the property investment advice industry and while there are some very professional people and organisation around to help investors, because of the potentially large amounts of money involved the property advice industry has attracted and army of truth-benders promising the moon.

Fast Money AdvisorA big enough commission can convince even honest, law-abiding salespeople that the dud properties (we’re looking at you off the plan apartments and house and land packages) they are offering are in their customers’ best interests.

So they promote optimism with stories like properties never drop in value, or (all) properties double in value every ten years, or the tax depreciation and lack of maintenance of your new apartment make it a great investment.

And over the years too many people have been bamboozled by these property spruikers version of optimism.

By the way…most promotions of optimism are realistic

But, of course, not all are.

Smile BusinessmanJust so you understand what optimism is — real optimists don’t believe that everything will be great.

That’s complacency.

Optimism is a belief that the odds of a good outcome are in your favour over time, even when there will be setbacks along the way.

I’ve read that the simple idea that most people wake up in the morning trying to make things a little better and more productive than wake up looking to cause trouble is the foundation of optimism.

Now that’s not too complicated.

But it’s not guaranteed, either. It’s just the most reasonable bet for most people.

So don’t become a property pessimist, despite what the media try to sell you.

Instead become a property realist.

NOW READ: How to spot a property spruiker from an advisor

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Michael Yardney

About

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 his opinions are regularly featured in the media. Visit Metropole.com.au


'Here’s why so many people are predicting a property market crash' have 4 comments

  1. Avatar

    March 24, 2019 Rajesh

    Can you please advice me the best suburbs to invest in melbourne for capital gain and rental yield as well . I am willing to spend 400k to 420k .

    Reply

    • Michael Yardney

      March 24, 2019 Michael Yardney

      Rajesh I’m sorry, but I’m not going to give you a ist of suburbs, because it would be very unwise to do so.

      I don’t know enough about your age, your timeframes, your risk profile, what other investments you have, your cash flow – now and into the future.
      And then you’ll need to buy the right property in that suburb –

      That’s why when we sit down with clients at Metropole, before we make any property recommendation, we recommend our clients have a Strategic Property Plan specifically built for them and their families requirements to ensure that they don’t become one of the many investors who fail.

      By the way…It will be very hard with your budget to find what you are requesting. Sometimes the right things to do nothing if you don’t have a budget is sufficient to buy an investment grade property in an investment-grade location. This may not be what you want to hear, but I don’t have anything to say so I rather give you the correct advice

      Reply

  2. Avatar

    March 22, 2019 Stephen Stone

    A lighthouse of rational thought , seemingly standing alone at times against a pessimistic storm of negative media frenzy. Thank you Michael for your professional , objective and experienced property market commentary.

    Reply


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