Many economists and media commentators are desperate to be the first to call the end of the boom and to predict that property prices will crash.
That’s why we’ve had widespread claims that the property boom is over, at different times, since the beginning of the last year – only to be proven wrong in each case by the publication of subsequent data.
As soon as there is any uncertainty or disruption in the Australian economy or the world, the doomsday forecasters come out of the woodwork telling us that it’s a prelude to property prices collapsing.
Right now, we have a cacophony of the usual suspects telling us prices will dive because there’s economic disruption from events both here and globally.
This sort of knee-jerk analysis is not based on any expertise, or research analysis, or even a simple examination of what has happened in the past during times of economic disruption.
So those doomsday forecasters will be, yet again, proven wrong.
History has shown us, again and again, that even enormous hits to our economy don’t normally result in prices falling.
In fact, often it’s the opposite.
It’s during times of global uncertainty or economic disruption that real estate performs at its best.
There are plenty of examples from the past 20 years, which shows that when we have times of economic upheaval, property values are more likely to rise than fall.
At the start of the 21st Century, we had the Dot Com crash and 9/11, which caused massive upheaval around the world – and, out of that, Australia experienced a major nationwide property boom.
It ran between 2001 and 2004 and was really the last time we had a situation similar to the current one – where prices everywhere were rising, and we experienced strong growth for a number of years.
The Global Financial Crisis hit in 2008 and once again it was broadly predicted our house prices would fall off a cliff.
One commentator, academic Steve Keen, became a media favourite and chat show darling because he was forecasting that our home values would drop 40%.
Well, that didn’t happen.
In fact, in 2009 and 2010 property prices rose in Australia – partly because the Federal Government pumped stimulus spending into the economy.
Two years ago, when the pandemic hit Australia, the usual suspects forecast that home values would drop 15%, 20% and in a worst-case scenario, as much as 30%.
What happened, in stark contrast to those dire predictions, was an extraordinary nationwide property boom.
I know it’s a cliché, but it is nevertheless true – in times of uncertainly people look to the safety and solidity of bricks and mortar to invest their money.
Real estate has a strong place in Australian culture and people trust the housing market to keep their money safe.
So they turn to it, in times of upheaval or economic disruption.
Despite all these previous lessons on how property prices react in those kinds of circumstances, we still have so-called experts forecasting big falls this year and beyond.
Right now, we have uncertainty like never before, both in Australia and globally.
We still have the pandemic, a war in Europe, growing inflation, soaring prices for food petrol and energy, rising interest rates and a whole lot more.
When Russia invaded Ukraine, one of the nation’s most failed forecasters predicted our property prices would drop 15% because it would create uncertainty.
But, as I have outlined, history shows that Australian real estate is at its strongest at such times. Real estate thrives on uncertainty.
Recently we have seen, in reaction to all that’s happening here and abroad, major upheaval on the sharemarket.
When that happens, more people turn to real estate for safety.
