Key takeaways
Many investors fall into the trap of buying in areas that have already boomed. But strong past performance often signals the end of a growth phase, not the beginning of another.
Property cycles move through booms, stagnation, corrections, and recovery, meaning today’s “hotspot” could soon underperform.
“Top-performing suburb” lists only show what has happened, not why. Without understanding the underlying drivers like infrastructure, demographics, or speculative FOMO, investors risk making decisions based on shallow, backward-looking data.
Recency bias, our instinct to trust what’s recently worked, pushes investors to chase momentum. This leads to buying at peaks, selling in panic, and missing opportunities in emerging, undervalued markets.
The forces that drove last cycle’s winners, interest rates, lending rules, migration, and planning policies rarely stay the same. Investors relying on yesterday’s conditions are effectively “fighting the last war.”
Have you ever noticed how everyone suddenly starts buying in a suburb after it’s already boomed?
Or how investors always seem to chase whatever market or asset class did best last year?
It’s human nature to assume that what worked before will keep working. After all, it feels safe to follow the evidence, “look at all that growth, how can it go wrong?”
But here’s the problem: basing your investment decisions on past performance is one of the most common and costly mistakes property investors make.
And it’s easy to see why.
When a suburb, a property type, or even a city has performed well, it gives us a sense of confidence.
It feels like proof that the fundamentals are strong.
But in reality, that past success can often signal the end of a growth phase, not the beginning of the next one.
The rear-view mirror problem
Investing based on past performance is like driving while looking in the rear view mirror. It can cause accidents
Now, I know we’ve all heard the disclaimer repeated in every investment advertisement: “Past performance is no indication of future results.”
He while this usually relates to financial products, this wisdom applies just as much to real estate.
Think about it.
If you only ever drive forward by looking backwards, you’ll either miss the corner coming up or crash into something you didn’t see coming.
And that’s exactly what happens to property investors who base their buying decisions purely on what has gone up.
Why the “past performance” approach is flawed
Let’s unpack why following yesterday’s property winners may not lead to tomorrow’s success.
1. The property cycle always turns
Property markets move in cycles - boom, stagnation, correction, recovery.
So, when you’re buying into an area that’s just had five or ten years of strong growth, you’re probably late to the party.
You’re paying peak prices for properties that may underperform for the next few years.
It’s like showing up after everyone’s already had dessert and expecting a three-course meal.
2. The data lies (without context)
Most “top performing suburb” lists are just snapshots of the past - and often a very selective past at that.
They show percentage growth, not why that growth happened.
Was it new infrastructure? A demographic shift? Or just a temporary demand surge from FOMO buyers?
Without understanding the underlying drivers, you’re just guessing.
3. Human bias makes it worse
We’re hardwired to chase what feels familiar and proven. It’s called recency bias - the tendency to assume that what happened recently will continue to happen.
But this bias leads investors straight into the herd mentality: buying at the top, panicking during downturns, and missing the quieter, better opportunities in the middle.
4. The market you’re chasing may have already changed
What worked in the past was shaped by specific conditions - interest rates, population growth, planning laws, and lending policies.
The conditions that drove past performance often don’t persist.
Population flows, interest rates, regulation, tax settings, and financing conditions change.
What was strong last cycle might be weak next. If your model is anchored in past performance, you can’t adapt.
So, if you’re making 2026 property investment decisions based on what worked in the last few years, you’re fighting yesterday’s war.
The alternative: Investing from first principles
So, if chasing past performance doesn’t work, what’s the better approach?
- Also read:Melbourne property market forecast for 2026 | Is it a good time to invest in Melbourne?
- Also read:Latest Property Price Forecasts Revealed. Australian Property Market Outlook 2026: Where To For Prices With Rate Cuts Delayed.
- Also read:Sydney property market forecast for 2026. Is it a good time to invest in Sydney?
- Also read:Brisbane Property Market Forecast [2026] – What’s Ahead & Where to Invest
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – November 2025
I call it “first principles investing” — basing your decisions on timeless fundamentals rather than short-term trends.
Invest in something that has performed well in the long term, not just in the last few years
Here’s what that looks like.
1. Start with your why
Before you look at maps, median prices, or growth charts, ask: What am I really trying to achieve?
Do you want long-term capital growth or cash flow?
Or are you trying to build an asset base that gives you financial freedom through a passive residual retirement income stream?
Clarity here stops you from being swayed by noise in the media or the latest “hotspot” reports.
2. Focus on structural drivers, not short-term momentum
Property values grow sustainably when they’re supported by strong underlying demand.
Look for locations with:
- A diverse local economy and job growth
- Population growth from desirable demographics (affluent professionals, skilled migrants)
- Quality infrastructure, schools, transport, and amenities
- Gentrification and urban renewal trends
- Limited supply of new dwellings
These aren’t short-term factors - they’re the deep, structural currents that drive property values over decades.
3. Look for a margin of safety
Smart investors plan for the downside, not just the upside.
Ask yourself: what if interest rates rise again? What if rents stagnate? What if there’s a temporary dip in demand?
Can you still hold the property comfortably through the cycle? If the answer’s no, the deal’s too tight.
Remember, you don’t get rich buying property. You become wealthy by holding it through multiple cycles.
4. Think portfolio, not property
Too many investors treat each purchase in isolation.
But property investing isn’t about buying “the best property” — it’s about assembling the best portfolio.
Each property should play a role: growth, cash flow, diversification, or stability.
Together, they should move you closer to your end goal of building a substantial asset base of income producing properties.
5. Keep optionality and flexibility
Choose assets that can evolve with you — properties with development or renovation potential, zoning flexibility, or dual-income possibilities.
These features add “option value,” letting you adapt as markets and your needs change.
The bottom line
The best investors don’t chase what’s hot - they buy what’s right.
They understand that the past doesn’t predict the future, but principles do.
So rather than following the herd into last year’s winners, focus on timeless fundamentals:
- Strong economic drivers
- Demographic trends
- Scarcity
- Long-term value creation
That’s how you build lasting wealth safely and strategically.
Because in property, just like in life, success comes not from looking in the rear-view mirror, but from keeping your eyes firmly on the road ahead.
