How hype ‘becomes gospel’ and creates property paranoia

Commenting on the positives of Australia’s property market on the Smart Property Investment Show, the Sydney-based property investor said that every year holds great investment opportunities, but positives are generally focused on the bigger cities.

When property in these locales is not positive, sentiment tends to trend towards “doom and gloom”, he said.

“I am a positive person and I’ll say this – there are always positive things here. This is an incredibly diverse country,” Mr Pressley said.

The head of research said the consensus around the property market is generally spawned through media reportings, which “becomes gospel because of everyone saying the same thing”.

“So, investors need to understand fundamentals and look at what they say, and then try to interpret what that means for the coming years, rather than getting absorbed in the here and now,” Mr Pressley said.

Noting some recent examples of false consensus in the Australian property market, he discussed the GFC as being “the Armageddon” for many investors, who feared that “the property prices were going to crash”.

It is now 10 years later and Mr Pressley said Australia is yet to encounter said Armageddon.

“The consensus in 2012… as you would recall, was all doom and gloom. Now, we know that 18 months later, Sydney and Melbourne had some pretty spectacular booms in spite of what the consensus said in 2012,” he said.

“In 2014, no one had anything positive to say about Hobart. Fast forward 18 months later, that started a boom that’s still going. In 2016, the consensus was that you could never oversupply Sydney and Melbourne. Fast forward 18 months, those two big markets are receding in value.”

In 2017, Mr Pressley said that the consensus around regional markets was that they would never grow because “there’s no bloody jobs there”.

Fast forward to 2018, Mr Pressley asserted, 200,000 jobs had been created in regional Australia and “there were about 40 or 50 regional locations that performed spectacularly well” over the past 15 months.

Further, Mr Pressley said: “Two days ago the ABS released the GDP figures… and that figure is lower than what the economists anticipated. So, everyone jumped on it and [said] ‘Oh my God, there's going to be an Armageddon.’”

“But three months earlier… it was a really strong figure and everyone's going, ‘Fantastic. Yeah. How good is this?’

“They chop and change really quickly. Investors need to look at all of the information in each location and then look at that as a picture of what lies ahead for the next sort of 18 months, two years, and forget the here and now.”