A new year and new opportunities… if you know what you’re looking for.
Let’s look at the property market now. What’s going to be different about this year?
I actually get the sense that the property market is turning a new page, and this is going to create a bunch of new opportunities.
To understand just what I mean, I think we need to look at three myths that have haunted the property market for decades – myths that we now might finally be able to put in the grave once and for all.
We’ve been hearing about Australia’s world-beating property bubble for about 20 years now, but the whole idea is starting to look a little silly.
Think about how the bubble was supposed to work. Australians, we were told, were caught up in an irrational love-affair with property. They were willing to pay irrational prices for property because they were confident that there would always be a ‘greater fool’ willing to pay even more.
As a result, real estate had become a giant Ponzi scheme, and as soon as something sharp touched the fragile balloon, it would all go pop.
Well, we had something sharp. We had a sharp correction in prices. Nationally, we saw prices fall about ten percent in less than 18 months.
Now bubble theory tells us that this should have caused a panicked rush for the exits. No one wants to hold an asset that has “detached from fundamentals” if there’s no greater fool around to buy it off them.
But, that’s not what happened.
In fact, the correction (which was largely caused by government intervention in the credit market anyway) was fairly orderly, and as we enter 2020, most capital city property markets are starting the year with wind in their sails. Price growth, at least over the next six months but probably longer, will undoubtedly be strong.
So, what happened to our bubble? There was no pop. There’s no mess left on the floor. And think about it: when was the last time you even heard someone talk about the ‘bubble’? It used to be front-page news, but now all those “experts” have become strangely quiet.
The Australian property bubble was just a myth, and a myth we can perhaps finally put to rest.
While there was no bursting of no bubble, I did see the correction give the market a shake.
In particular, negatively-geared property investors found their hearts in their throats. Many of them, for the first time, found themselves holding an asset that was bleeding cash AND falling in value.
As someone who has been waging a war against negative gearing for decades, I’m, seeing a surge in the number of investors coming to me looking for a new (and better!) way of doing things.
Negative gearing is not the way to build wealth through property, and maybe, just maybe, it’s time we can put that myth to rest too.
The other shift I’ve seen is, ironically, renewed optimism on the part of first-time investors. For a long time, the phrase I kept hearing was, “I’d love to get into property but all the bargains are gone. I’m too late.”
The recent shake-out has given new investors heart, and given people hope that there are still “good buys” to be found.
I’d say that there are always “good buys” to be found in any market if you know what you’re looking for, but yes, to a certain extent, it’s true. This correction has given the market the reset it needed, and the coming expansion phase (which I expect will run to 2025-26) should create plenty of opportunities.
That said, if you’re going to play by the old rules – if you’re one of those investors willing to pay any-old-price for any-old-negatively-geared investment property in the hope that the market goes with you, you’re still taking a gamble that I wouldn’t take.
So it seems to me that the Australian property market is at a point of inflection. Things are changing.
That creates a lot of opportunity for people with the right strategies behind them.
And what do those strategies look like?
Well, I’ve got a bunch of tried and true strategies in my tool kit. But you never know what else the year will bring.
[TK1]I’m being cute