It looks like 2020 is turning out to be a boom year!
But before you start worrying what Michael Yardney is on…
I believe this is going to be a boom year for fright!
The media is at it again and there is no shortage of scary headlines.
While many of us started the new decade with optimism, it didn’t take long for the frightening headlines to appear.
Remember back in January the headlines screamed:-
- “Middle East tension will start the next major war”; – that was quickly forgotten
- “Tragic bushfires means Australia will fall into recession”; – the bushfires were tragic and are unfortunately also forgotten by many, but they didn’t lead to the recession the media warned us about.
Now the message we’re hearing is:-
- “Corona Virus will lead to a world recession”; – they got that one right didn’t they.
We live in interesting times, don’t we.
But then looking back over my many years of investing, just about every year is a boom year for fright.
As far back as I can remember there have always been scary stories in the media.
And looking back over the years I have invested through 2 recessions – the early 80’s and the early 90’s.
I have also invested through many property upturns and slowdowns, stock market highs and crashes, periods of high (in fact double digit) interest rates and periods when people thought housing was unaffordable or would never go up in value again.
Yet despite all this, the value of my properties keep doubling allowing me to refinance and buy even more properties.
Like I said, there’s always bad news in the media
I remember in the late 1980’s the cry was, “Don’t buy houses… they can’t go up in value. Your kids will never be able to afford them.”
In between there was a regular parade of overseas “gurus” explaining how our property market is a significantly overvalued house of cards that is about to topple.
Just think back to 2017-8 with all the predictions of a property market crash and look where we are today.
Yes, there always seemed to be scary headlines about a grim future which could have given me plenty of reasons not to invest in property.
Before the global warming crisis there was an over-population crisis with politicians, environmentalist and economists predicting massive food shortages, rioting in the streets, rampant cannibalism and an impending collapse of society.
I even recall a panic about global cooling.
Of course, the media gets more mileage out of this type of story.
They find it hard to get readers’ interest reporting on significant population growth, strong exports of our minerals, infrastructure spending, the greatest number of Australian investors on record and a sound banking and financial system.
This is boring.
To be a successful property investor you need to step back and take a big picture view and refuse to be scared by the next boogey man jumping out from behind the bushes.
The fact is, this week somebody’s getting married, somebody’s looking forward to having a baby, somebody’s getting promoted, somebody’s getting transferred, somebody’s getting divorced.
And a lot of people are happening to get rich.
This year around 100,000 new households will be formed in Australia and they are all going to have to live somewhere.
Those that can’t afford to buy, will have to rent.
This means the long term fundamentals, in fact the medium term fundamentals, for property are very sound.
And if you take a long term perspective, you’ll be able to spot and act on opportunities that arise this year as many potential home buyers and investors get scared by this boom year for fright.
A year of opportunity
I see 2020 as being a year of great opportunity for strategic property investors with a long term focus.
A year of opportunities for those who are willing and able to see the big picture.
But remember — what you look for is what you see.
If you look for bad news, you’ll find it, because clearly there is a lot of it around.
On the other hand, if you look for opportunities, you will find them.
Many strategic property investors with a long term outlook see the current slump in market sentiment as a window of opportunity to get set before the rest of Australia crawls out of its Coronavirus Cocoon.
Sure there are a lot of headwinds and challenges for our economy.
And yes… we’ll fall into recession – in truth we’re already in recession.
What will happen to our property markets will depend upon how soon our economy picks up, the level of unemployment and importantly the level of consumer confidence coming out of our recession, which will be a good barometer of all the above factors.
Fortunately our Federal government has learned a lot about handling monetary and fiscal policy during economic downturns resulting in the slashing of interest rates, the introduction of Quantitative Easing and our spending $300Billion plus to build a bridge to get us through this and will now doubt spend a lot more to kickstart the economy.
At the same time the State governments have introduced their own support and stimulus packages.
Sure, unemployment will rise to double digits and unfortunately some businesses will not reopen, but the economy is likely to rebound in the 4th quarter of this year or early next year at which time we are likely to be experiencing a perfect storm for property.
The International Monetary Fund has forecast that the Australian economy will contract by 6.7 per cent in 2020, but expects the domestic economy to rebound by 6.1 per cent in 2021, assuming that measures to contain the virus are successful.
Of course if Australia experiences are multiyear downturn, caused by the world economy imploding, then of course property values would drop considerably.
I know some doomsayers are predicting this, but these are not the type of forecasts made by the credible economists I have been following.
I’ve found that when there’s lots of bad news people believe times are going to be tough forever, just like when things are good people forget the bad times ever existed and think that things are going to remain good forever.
Neither case is true!
2020 will be the right time to educate yourself as an investor and take advantage of the opportunities that any short term slump in the property market delivers.
Yes, there are economic challenges ahead and sure property values will be unaffordable for some – but it’s always been that way.
As always, while some people worry about the bad news and sit on the side lines, strategic investors will set themselves for their future financial freedom by purchasing well located real estate, recognising they only get a few chances in their lifetime to invest at the beginning of a new property cycle.
What are you going to do in 2020?
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on
If you’re wondering what will happen to property in 2020–2021 you are not alone.
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- 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! This will give you direction, results and more certainty. Click here to learn more
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