Early last year the banks, economists, and other analysts were wringing their hands, predicting economic gloom and claiming that our property markets were about to crash.
Analysts and economists often rely on past performance to help them make predictions, so when the pandemic hit our shores, they scoured the history books to check what had happened to the housing market during previous disasters.
They saw that past crises such as the Great Depression and the Global Financial Crisis had caused property markets to slump, and that’s what prompted their doom and gloom property market predictions. Unfortunately, they looked to the wrong events and so they were misled.
The pandemic was not an economic or financial crisis, but a social one
Previous economic and financial disasters were not the right examples to rely on, because the pandemic was different. It was a health and lifestyle crisis which called for social remedies such as physical distancing, mask wearing, working from home, lockdowns, quarantines, border closures and vaccination.
While the crisis was rapidly escalating early last year, I stood seemingly alone in a sea of doom, advising investors not to panic. My blog, published on 15 March 2020 in Your Investment Property, reassured property owners and investors that “property prices will continue to rise in our major capital cities despite the pandemic.”
In that blog (shown on right), I explained that my prediction was based on what happened after a similar pandemic hit our shores. This was the Spanish Flu, which occurred after World War One.
I discovered that rather than crashing, housing prices actually grew by more than ten percent each year once the worst of the pandemic had passed.
In fact, buyer demand rose to such an extent that it completely overshadowed the effects of the Spanish Flu. Why did the pandemic result in a property market boom? The reason was that once the worst was over, buyer confidence quickly returned.
People started buying homes with deposits they had saved during the crisis, and fueled by lower interest rates, government incentives, easy housing finance and reopened borders, the housing market boomed.
This is, of course exactly what is occurring again right now and the growth prediction I confidently made in Your Investment Property early last year has been confirmed.
John Lindeman is widely respected as one of Australia's leading property market analysts, authors and commentators.
Visit Lindeman Reports for more information.
He has well over fifteen years’ experience researching the nature and dynamics of the housing market at major data analysts.
John’s monthly column on housing market research featured in Australian Property Investor Magazine for over five years. He is a regular contributor to Your Investment Property Magazine and other property investment publications and e-newsletters such as Kevin Turners Real Estate Talk, Michael Yardney’s Property Update and Alan Kohler’s Eureka Report.
John also authored the landmark books for property investors, Mastering the Australian Housing Market, and Unlocking the Property Market, both published by Wileys.
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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.