For more than a year the Reserve Bank hiked interest rates to the highest level in decades and there were lots of warnings about an imminent collapse of the Australian housing market.
Not many people expected interest rates to rise so high and so fast, and not many people expected the most interest rate-sensitive portion of the economy, our housing markets, to be so resilient.
Today, financial advisor Stuart Wemyss and I discuss the reasons why many predictions were way off, highlighting the role of market dynamics and interest rates.
We discuss the challenges of predicting the market bottom and explore the cognitive biases that could cloud judgment.
Learn about how the housing bears got it so wrong and whose advice should you be listening to as you plan for what’s ahead in the property market.
How Did Economists Get Their Property Predictions So Wrong?
In my chat with Stuart, we look into:
- Factors to consider when reading forecasts
- The psychology of homeowners
- What’s happening on the ground
- The inaccuracies in Australian housing market forecasts by economists and banks
- The potential dangers of blindly believing in market 'experts'
- The financial stress endured by homeowners and the significant role of market dynamics and interest rates
- The change in bank forecasts and reasons behind the shift
- The challenge of predicting the market bottom in long-term property investments
- The impact of cognitive biases on decision-making in property investment
- Importance of an evidence-based approach focusing on long-term investment and compounding capital growth
- Emphasis on strategy over luck in successful property investment
We emphasize the importance of an evidence-based approach in property investment.
We highlight the role of strategy over luck, and the need to learn from failures rather than shying away from them.
Links and Resources:
Stuart’s Book – Rules of the Lending Game & Investopoly
Some of our favorite quotes from the show:
“I think the other thing they missed was the supply and demand ratio. In other words, we went into this cycle with an undersupply of properties.” – Michael Yardney
“Rather than look for what's going to work now or in the next year or two, look for what's always worked and what's likely to be in continuous strong demand in the future.” – Michael Yardney
“So, the best way to reflect on your failure is to focus on the lessons that you've learned and the person you're going to become, rather than spending time trying to avoid failure.” – Michael Yardney
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