There are a lot of reports about property bubbles bursting and markets crashing, but what does a “property crash” actually constitutes?
One of the top stories of The Smart Property Investment website is "A property crash ‘remains unlikely’”, which discusses why a crash isn’t in the horizon even though Sydney and Melbourne property markets continue to be at sky-high.
According to Smart Property Investment’s Phil Tarrant, stories about property bubbles and market crashes, albeit abundant in different platforms, are actually quite tedious. As an avid investor, he chooses to understand “property crash” as the worst-case scenario—the end of the property industry.
He said: “It's The Great Depression again. There's massive unemployment, the sky is falling in. That's what a property crash is.”
A lot of investors get a little too caught up with the possibility of a property crash since the growth of their investments come at only 2 per cent to 3 per cent instead of 5 per cent to 7 per cent. However, according to Phil, this is part of a normal property cycle. Property markets, like most financial ventures, go through different fluctuations and a downtime does not necessarily mean that a particular market is crashing.
Phil said: “It's a property correction … The city market's grown rapidly over the last four or five years. Is it going to continue to grow with that rate for the next 5-10 years? Probably not.”
“I don't think anybody should have that expectation,” real estate editor Tim Neary added.
To put it in perspective, both Phil and Tim said that a real property crash would look like the Wall Street crash back in the 1920s—an investor could lose 10 per cent to 20 per cent of value overnight.
“I don't think that's going to happen in [the] residential real estate in Australia,” according to Phil.
As much as research matters, it’s also important that property investors are able to filter all the information they get. Aside from data that has become easier to collect, thanks to technology, a lot of people will also have different opinions about property and all of these could be hard to process and may lead to the so-called “analysis paralysis”, which impedes smart decision-making.
Phil’s advice to property investors: Seek the guidance of reliable property professionals who will guide you through your journey with your best interest at heart.
He said: “Be careful about where you get your advice … Everyone in Australia is an expert on property markets. You go to a barbecue, everyone's got an opinion on it.”
“There's a lot of people out there peddling pretty negative property advice, so you need to be really confident that who you listen to is the right person to listen to.
“What makes me a good investor … is that I get my advice off ... from the right people and it's informed and educated advice.
“I challenge the advice I get. I question the advice I get. I make sure I get many, many different opinions, and I use those different pieces of information I have to dictate and direct me what I do as a property investor,” he concluded.
Tune in to The Smart Property Investment’s Show special "Top 10 articles of 2017" episode to know more about foreign investment, crowdfunding, the threat of the bursting bubble, and the many reasons why you should invest in property.