How to profit from bad news predictions - November 2024

By Rich Harvey, CEO & Founder, propertybuyer.com.au

For decades, the New South Wales Central Coast region was in a property market holding pattern. It was flying under the radar of homebuyers and investors alike. But COVID’s significant upheaval brought the region into the limelight. Now, a raft of drivers across the political and economic spectrum will deliver exciting times to the Central Coast – and those who own property will be among the biggest beneficiaries.
Anthony Knight, Principal buyers’ advocate for Propertybuyer on the Central Coast, has lived in the region for decades. We recently chatted about the region and why he’s excited about what’s to come.

Sometimes it feels like there are almost as many property industry prophets in Australia as there are actual properties, with a whole host of experts of varying degrees of quality keenly offering their thoughts on what’s going to happen to real estate in the period ahead.

I’m not Nostradamus and I don’t have a magic crystal ball, but I’m fairly certain of a few things.

The first is that we’re likely to enter a period where gloomy forecasts of doom come from some of these ‘analysts’.

Interest rates haven’t started to fall, as was expected, and momentum has started to wane in some parts of the country.

As history has shown, any signs - however small - of things not going according to plan will usually see armchair experts take to newspapers, television, radio and blogs to share their bad news two cents.

But the second thing I’m confident of is that many of these predictions won’t eventuate. They’re often black-and-white stabs in the dark, in a sector that’s millions of shades of grey.

We’ve seen it before, and we’ll see it again this time - and savvy investors who can read between the lines can profit from these dire pronouncements.

Unprecedented market crash

When the Covid pandemic was declared and the world shut down and billions of people sheltered in their homes, economists in Australia braced for the worst.

Massive unemployment. A crippling recession. And a real estate crash unlike anything we’ve seen, with some tipping rapid price plunges of 30 per cent or more. Some of the dreariest outlooks came from major banks and their very respected economists.

What happened? Australia’s resilient economy, a period of high population growth, government stimulus, a shortage of rental properties, and a slump in home-building rates, to name just a few.

Those drivers not only put a floor beneath the economy, but sparked a new period of growth. From the onset of the pandemic to now, home prices at a national level have surged by more than 38 per cent and are on average $225,000 higher than they were.

In Sydney, the rate of growth from the start of Covid to now is sitting at 29 per cent, while in Brisbane it’s at a whopping 66.9 per cent. Things have been even stronger in Perth (76 per cent) and Adelaide (70.8 per cent).

Falling off a steep cliff

While interest rates were at a historic low, before the Reserve Bank began hiking them in its war against inflation, millions of mortgage holders rightly took advantage.

There were record levels of borrowers fixing enticingly small rates, locking in smaller repayments and enjoying a level of budgetary certainty they’d never experienced before.

As those fixed rate agreements approached expiration, in the midst of much higher rates, economies again warned of dire consequences. Those borrowers were hurdling towards a cliff, they said, given they’d be about to go from small repayments to very high ones - in some cases, a couple of thousand bucks more each month.

This financial shock would push countless Aussies to the brink, sparking a fire sale of property and plunging real estate markets into chaos… or so we were told.

There’s no doubt that going from fixed to variable rates hurt. Mortgage stress has had a big impact on household budgets. But by and large, borrowers were in a decent position to weather the storm. As a result, we haven’t seen those promised consequences of the fixed rate cliff.

And there was no devastation in property markets either.

The once-in-a-century crisis

Let me be clear - the Global Financial Crisis wasn’t a cakewalk. But it also wasn’t the crushing event that virtually everyone in Australia told us it would be.

Yes, growth slowed. And yes, the real-life, everyday impacts on ordinary people were felt. But we didn’t see the country grind to a halt, we didn’t see banks collapse, there was no arrival of the economy Dark Ages, and home prices did not crash in the order of 20 per cent.

What those prophets warning of doom and gloom missed was the impact of unprecedented government spending on stimulus. What they failed to appreciate was the broad resilience of the economy.

As a result, the period of decline was brief. We didn’t see a real estate crash, and the easing of the GFC sparked a new era of confidence in many parts of the country.

Making hay while the sun don’t shine

The problem with gloomy forecasts that don’t eventuate is that many people can be tempted to listen to them and let it affect their decision-making. Suddenly, dark storm clouds gather and lots of people flee inside to hide.

Buyers get shy. Sellers panic and rush to market. Investors without insight and a strategy look at both those things and decide to sit on their hands.

But let’s assume the current price growth slowdown in some cities persists and even spreads to other parts of the country. Some buyers will indeed decide to put off their purchasing plans. Some sellers will see this trend and rush to market. What that means is less competition, so reduced demand, and more to choose from, so extra supply.

Know what happens when demand is low and supply is high? Savvy investors who make targeted decisions have a good chance of buying quality properties at a discount. They can make moves without having to race against hordes of emotion-driven competitors. They can pick from a broader selection of homes in the market than has been the case. And they can negotiate from a position of strength.

I think there are about to be some prime opportunities, particularly in premium pockets that have great long-term growth prospects.

Smart investors will take advantage and work with a team of qualified experts, including a really good buyer’s agent, to sniff out these nuggets of gold.

A great buyer’s agent can work with you to identify your goals, find suburbs and individual properties that suit your strategy, assess their likely performance trajectory, and then negotiate the purchase on your behalf.

The window of opportunity could be quite narrow. When interest rates start to fall, which is inevitable and probably closer than it might feel right now, there will be a return of confidence - and of intense competition. My advice is to act now by speaking with our team of independent property experts about your own needs and goals. Their levelheaded approach, local knowledge and extensive list of contacts can be leveraged to your advantage.

That way, you’ll be the buyer with a sunny outcome as all those dire warnings are left in your wake.

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