Like clockwork, media outlets are abuzz with projections from economists and market commentators, all eager to share their predictions about the trajectory of property prices, rental trends, and the broader economic landscape.
But before you take any stock of these forecasts, let's take a moment to consider why we're drawn to them and whether they truly hold water.
Our brain's quest for certainty
It's human nature to search for predictability in an unpredictable world.
Psychologists have long understood that we're wired to prefer certainty to ambiguity.
Confronted with an uncertain future, we naturally crave clarity, assurances, and a grip on the steering wheel of life, even when we know, deep down, that it might be nothing more than an illusion.
This craving for predictability is why we find comfort in predictions.
They provide a story. A forecasted path that helps us feel secure and less anxious about the days ahead.
Somehow it seems that it doesn't particularly matter if the predictions are accurate; it's the sense of order they offer that we're after.
Of course, the realities of the complex world mean many things cannot be predicted accurately.
Nonetheless, pundits who boldly predict detailed property market outcomes will always have an audience because of how our brains are wired.
Admitting the future is ultimately unpredictable is unsatisfying.
This is why the temptation to listen to market forecasts remains despite their terrible track record.
The harsh truth about property predictions
Now, onto the credibility of these forecasts.
Historically, they've been hit or miss – and mostly miss.
A year ago many experts forecasted 2023 would be a year of falling property prices. Yet, we now know that most of our housing markets performed very well, with many suburbs exhibiting double-digit growth.
This disparity between predictions and reality isn't all that surprising when you consider the nature of economies and markets.
These systems are inherently complex and adaptive, with so many interacting variables.
Such complexity makes the task of prediction daunting, and the occurrence of unforeseen 'black swan' events only add to the challenge.
It becomes clear that being swayed by these forecasts is less about informed decision-making and more about seeking psychological comfort in the face of uncertainty.
As the legendary investor Warren Buffett has famously said,
"Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future."
In other words, the forecasts you come across might reveal more about the forecaster's ego and their quest for the spotlight than they do about any impending economic or market conditions.
The long game
So, what's the alternative to hanging onto the words of these annual predictions?
The answer is simple yet profound: Take the long-term view.
I’m talking about a horizon that stretches 10 to 15 years into the future.
While the average Australian wonders what they’re doing this weekend, and many investors are preoccupied with the short-term fluctuations of interest rates, strategic investors have their gaze fixed on the distant future.
They don't worry about where interest rates are going to be in six months, they look to where our housing markets are going to be in 10 or 15 year’s time.
They don't make 30-year investment decisions on the last 30 minutes or even the last 30 days of news.
They understand that it's the underlying fundamentals, those bedrock principles that have historically propelled property prices upward over the long term, that matter most.
At Metropole, we have always advocated for and implemented solid, evidence-based property investment strategies for our clients.
This strategy has consistently proven effective over time and it's this disciplined, long-term perspective that we believe will continue to yield the best results for our clients.
And it all starts with building a Strategic Property Plan because planning is bringing the future into the present so you can do something about it now!
3 thoughts for investors
- There is no right way to invest, no single optimal strategy, and no one universal goal. Different investors have different time horizons, risk preferences, income levels, personal values, emotional biases, and expectations. They also face different constraints, opportunities, and challenges in their lives and markets. Therefore, they play different games with their money.
- Figure out your own game and stick to it: Clearly define your investing game and focus on playing it.
- Be cautious of taking cues and advice from those playing different games as this may lead to unintended risks and outcomes.
As a property investor, understanding your game and staying true to it will empower you to navigate the complex world of investing with clarity and confidence.
By acknowledging that there isn't a one-size-fits-all approach, you'll be better equipped to make informed decisions that align with your unique goals and circumstances.
So while it may be tempting to get swept up in the annual tide of market forecasts, my advice is to remember that, in the grand scheme of things, they're little more than distractions from the core principles of successful property investing.
Image by petr sidorov on Unsplash.