Expert Advice with Michael Yardney. 28/12/2017

I predict that 2018 is going to be a boom year!

But before you start wondering what I’m “on”, let me explain... 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 stuff headlines. Things like – “The Property Boom is Over” “Values Will Crash” "Housing is unaffordable!"; "More APRA regulations coming"; “Apartment Oversupply”, “The End of Foreign Investment”; "Kim Kardashian does it again!"

Of course, 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 many property slow downs, times 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.

I remember in the late 1980's the cry was, "Don't buy houses, they can't go up in value any more. Your kids will never be able to afford them." There were similar headlines in late 2003, predictions of our property markets collapsing in 2008 and when interest rates rose in 2010 the media once again predicted the end of the property boom.

Then there’s the regular parade of overseas “gurus” explaining how our property market is a significantly overvalued house of cards that is about to topple.

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 than boring good news stories about substantial jobs creation, strong infrastructure spending, significant population growth, the greatest number of Australian investors on record and twenty six years of continuous economic growth for Australia.

This means 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 our population growth will offer continued support for our property markets with UBS suggesting that when you add short term arrivals to our permanent resident growth, Australia’s “people growth” is striding ahead at a record high annual growth of 3.5% meaning over 850,000 more people are going to have to live somewhere. Those that can’t afford to buy will have to rent.

The fundamentals for our property markets are 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.

I see 2018 as being a year of great opportunity for strategic property investors. 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. On the other hand, if you look for opportunities you will find them.  Smart investors will recognize that the current market presents them with a smorgasbord of opportunities and will step up and take advantage of them.

I’ve found that when there’s lot’s 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!

In fact, during booms people are most confident when they should probably be the least confident, as things can’t continue travelling at breakneck speed and above average rates of growth. Similarly, during the market slowdowns, things eventually turn around. Ironically, people have the least confidence when it’s more likely that things are going to improve...that is, when markets are near their lowest point.

2018 will be the right time to educate yourself and get set to take advantage of the opportunities this next stage of the cycle presents.

Yes, price growth has slowed down, but this is a normal part of the ups and downs of the property cycle. The good news is that this time around the market slowdown has occurred in a low interest rate environment, so we won’t have a deep downturn with significant drop in property prices that may have occurred if the RBA had to raise interset rates to slow down the market.

As always, while some people worry about the bad news and sit on the side lines, astute investors will set themselves will set themselves up for the next stage of the property cycle by purchasing well located real estate.



Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.

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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.