PROPERTY commentator Michael Yardney says that it’s customary for those in the property industry, at this time of the year, to peer into the future in an attempt to predict what’s ahead for our housing markets.
While making such forecasts is not an exact science, Mr Yardney says that he can safely make five predictions that he is certain will be true for 2019.
1. Most predictions will be wrong!
His first prediction for the year is that it will be a bad year for those in the prediction business.
“I’m sure this will be correct as most economic and property experts get it wrong despite being armed with all the research available in today’s information age,” Mr Yardney said.
“The problem is that while the fundamentals, things like population growth, supply and demand, employment levels, interest rates, affordability and inflationary pressures, are easy to monitor; one overriding factor that the experts have difficulty quantifying is investor sentiment.
“Currently investor sentiment is low, in fact the lowest it’s been for decades, despite the economic fundamentals being quite solid.”
2. Many things won’t happen and others will
Many of the predictions for 2019 won’t happen and a lot of things will happen this year that no forecaster thought to include in their predictions because market movements are far from an exact science.
“Every year there is an ‘X factor’ sometimes called a Back Swan event,” Mr Yardney said.
“This is an unpredicted factor, either locally or from abroad, that impacts our markets either positively or negatively.
“However, in retrospect, these unexpected events will seem to be the obvious consequences of the current economic and political environment.
“Last year no one really predicted the full impact on the world of finance from the revelations of the Haynes Royal Commission nor the depth of the crisis in consumer confidence that would be brought about the credit squeeze.”
3. Some forecasts will be right
Mr Yardney predicts that a small number of the many economic and property forecasts for 2019 will accidentally come true and those who randomly predicted them will claim to be experts, despite the fact that it was the first time they got one of their hundreds of forecasts right and that they adjusted their forecasts over the year as circumstances unfolded.
4. I believe that most property investors will get it wrong this year
This one is simple –they always do says Yardney.
“And I’m not talking about those who fail to take action this year and wait for things to be just right before they get into the market, even though that will be a big mistake this year.
“What I’m talking about is based on data from the Australian Housing and Urban Research Institute, which shows that 20% of those who do invest in property sell up within the first 12 months and 50% sell within the first 5 years.
“These failed investors will never gain the long-term wealth creation benefits that property investing is all about.”
5. Those who get it right will do very well
Mr Yardney’s last prediction is that those property investors who get it right will do very well out of real estate this year and set themselves up for the years ahead.
“Those who saw previous property downturns as a countercyclical opportunity have consistently done well for themselves,” he said.
“They recognise the slower market as a chance to invest when others are too afraid to buy and when there are more willing sellers in the market than purchasers. At this time in the cycle correct asset selection will be critical, you need to buy an ‘investment grade’ property below its intrinsic value and one that has a ‘twist,’ something special about it.”