Using history to make tomorrow’s investment decisions

Speaking about the importance of understanding the past market and economic factors, Mr Tarrant commented that history “helps you shape strategy, perception and how you choose to approach stuff with clues on how things play out. This gives you great leverage for taking action”.

Giving an example from the recent past, Mr Kumar remarked that anyone who had done their homework would have known all too well that 2 per cent interest rates would not last long.

“Historically, it’s sitting around 5.5 to 6 per cent,” he said, adding that investors need to plan for that cash rate adjustment.

Noting that in real estate, the certainty of change is about as black and white as it gets, Mr Kumar opined that a bad strategy is one that expects everything to stay the same.

According to the investing expert, every new change “gets dressed differently … but it still happens just the same”.

Mr Waters agreed, adding that history essentially allows investors to make educated guesses, knowing that at certain times there are going to be opportunities available.

The trio are applying this practice to the present day to understand how the current issue of low rental stock might develop, given previous instances of tight vacancy rates.

“If we then play that out over the next five years, the problems of today will compound acutely for the following 12 to 24 months or thereabouts,” Mr Waters predicted.

“Side note, in the whole of the country, there’s only about 33,000 properties for rent right now,” he added, explaining just how tight rental conditions are across the nation.

With low stock persisting through the rental and sales market, the three property investors agreed that the lack of available rentals could continue long term if change isn’t enacted in the places where policy is made.

Opining that too much decision-making is done in a bubble, Mr Tarrant noted it’s important that power is given to people with lived experience.

“We need people with battle scars, people with normal jobs, who have been in the normal workforce, to make the decisions, help make the decisions because they’ve gone through it, and we don’t have that,” he said, highlighting that personal history is an important teacher for policymakers, too.

You can listen to the full podcast here.