As we enter a new year and the beginning of a new property cycle, there are still many mixed messages in the media leaving many investors and potential homebuyers confused.
Hopefully, by the end of today’s show, you’ll be a little less confused because I’m going to ask Dr. Andrew Wilson, Australia’s leading housing economist, some of the questions you’re probably thinking about.
But before that, we’re going to discuss some lessons that we’ve learned in 2019 that will make you a better property investor in 2020.
I also have a mindset moment to share about things I would have liked to know earlier.
4 Property lessons
As we enter a new year and in fact a new property cycle it’s interesting to look back at 2019 and see what lessons we can take out of 2019 to make 2020 a better year in property.
Let’s take a look at 4 property takeaways from 2019:
- Be careful whose forecasts you listen to.
What happened to all those predictions of 40% house price falls for the Australian property markets?
Lower interest rates, a miracle election result and looser lending criteria saw the property markets in our 2 biggest capital cities surge in the second half of 2019
- Property investing is a game of finance - with some houses thrown in the middle.
This became clear as APRA tightened the lending screws on property investors from 2014 through till 2018 causing the biggest decline in our property markets in modern history.
Then when the banks’ lending criteria became more relaxed and interest rates fell in 2019 our housing markets rebounded strongly.
- There is not one “Australian property market”.
While the fundamentals of strong population growth and the wealth of our nation will underpin the Australian property markets, there is not one “Australian property market.”
Each state is at its own stage of its individual property cycle and within each state there are many markets segmented by geographic location, dwelling type and price point.
- Expect the Unexpected.
Every year an unexpected X factor comes out of the blue to undo the best laid plans – some on the upside (like the miracle election result in mid-2019) and sometimes on the downside.
Sometimes these are local issues and at other times they come from overseas. However, over the long term our housing markets are driven by the fundamentals so don’t make 30-year property investment or home buying decisions based on the last 30 minutes of news.
Bonus Lesson: The property market is not a get rich quick scheme, however those who own well located properties will benefit from the long-term growth of their properties. As Warren Buffet wisely said: “Wealth is the transfer of money from the impatient to the patient.”
An expert answers your property questions
While our property markets are entering a new property cycle, currently there are lots of mixed messages in the media – some positive and many negative.
This has led to many listeners to our podcasts leaving questions and asking for clarification.
So, in my chat with Dr. Andrew Wilson today I’m going to ask him to answer these questions which, if you’re interested in property, are likely to be on your mind also.
- Is Australia going to fall into recession in 2020?
During 2019 the RBA realised that the Australian economy wasn’t as rosy as it had hoped.
The labour market deteriorated, unemployment rose, incomes growth languished, inflation failed to increase, and our GDP slowed down despite 3 interest rate cuts.
It was really only mining sector and government spending that kept our economies head above water.
But as the year finished off, the latest labour market data at the end of the year showed a slight fall in unemployment and jobs growth albeit mainly part time jobs.
But there are now signed of an improving global economy, particularly driven by the strong US economy.
All this makes an Australian recession in 2020 very unlikely.
- What is likely to happen to interest rates in 2020?
While rates are likely to be cut again twice again in 2020, it is now more likely that the RBA will hold off cutting interest rates in February as many commentators are predicting.
Their decision will depend on the end of year economic data that will be published in February and March.
- Will the strength in the Australian property markets continue in 2020?
The auction markets finished 2019 strongly indicating plenty of home buyer and seller confidence.
Other factors that will underpin strong property markets especially in Sydney and Melbourne include:
- The First Home Buyer Scheme that came into effect on January 1st
- The prospects of further interest rate cuts during the year
- Fear of Missing Out – as the markets rise strongly
The missing link at present is investor activity. Investors are keen to get into the market, but many are having trouble getting finance due to restrictive bank lending practices.
- What will be the major influencers of our property markets in 2020?
Just as lack of confidence held back our property markets at the beginning of 2019, strong market confidence will be one of the main driving factors of our property markets in 2020. Particularly the Melbourne and Sydney property markets
Other factors that will lead to continued property price growth include:
- Pent up demand as property values in Melbourne and Sydney retrace their lost ground. These markets should reach new price peaks in the first half of 2020.
- Supply and demand – our population keeps increasing, but there is now very little new dwelling construction in the pipeline which will create a shortage of housing.
- Falling interest rates over the first half of the year
- A slowly improving Australian economy.
The bottom line.
The opportunity to take advantage of the beginning of a new property cycle only comes around a few times in your lifetime.
Strategic property investors and smart home buyers will take advantage of the opportunities the property markets present in 2020.
Links and Resources:
Join us at my annual Property Market and Economic Update – come as my guest using the Coupon Code: PODCAST Click here for details
Some of our favourite quotes from the show:
“If you listened to all the Negative Nellies and the property pessimists, you would have missed out on some great opportunities 12 months ago.” – Michael Yardney
“Mistakes teach you important lessons.” – Michael Yardney
“The more you know, the more control you’re going to have over your life.” – Michael Yardney
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