Market downturn is one of the scariest terms for many investors. See why this doesn’t have to be the case.

There are very few positive news stories these days when it comes to the Australian property market. Analysts who are bullish about the market are few and far between, drown in a sea of doom and gloom predictions.

Wealth for Life Property Investment cycles
  • Facebook
  • Twitter
  • Google+
  • Pinterest
  • Gmail
  • LinkedIn

It’s true that the market isn’t having its best days. Some of our biggest markets are seeing a serious downturn. But don’t forget that property prices had had a big run-up in the 2010s and prior to 2018.

Property investment is a complicated affair. An unfavourable short-term trend doesn’t mean it’s time to run as fast as you can. In fact, the opposite may be true if you focus on the long run.

Like most investment assets, the property market moves in cycles. This may just be a temporary correction, which always tends to shake out the weak-kneed investors. Their knee-jerk reaction to falling prices would be to get out as soon as they can. This is never a good idea for those who are in it for the long haul.

If you know where to look, you’ll find more arguments in favour of holding than selling. Here are 5 reasons to illustrate this point.

1. Panic-Selling Is Never a Good Idea

Warren Buffett famously said ‘When others are greedy, I am fearful. When others are fearful, I am greedy’. This reflects the current property market perfectly. Some of the worst investment decisions come from fear, so you need a cool head on your shoulders in times of market volatility.

Wealth for Life Property Investment Fear
  • Facebook
  • Twitter
  • Google+
  • Pinterest
  • Gmail
  • LinkedIn

You might see your fellow investors go out of their way to sell. Naturally, this will create an atmosphere of panic that drives prices lower and convinces other investors to cut their losses.

But, you need to know how the property market behaves, which leads to the next point.

2. The Market is Cyclical

Every investor should know this basic macroeconomic rule. Markets are cyclical and go through stages of uptrend, plateau, downtrend, and bottom. What this means is that the downturn that we’re seeing will bottom out, and an upturn will follow.

It’s the classic ‘it’s always darkest before the dawn’ situation. As mentioned, weak investors flee and accelerate the decline. These noises in the market shouldn’t bother the smart, patient investors. There’s proof that the downturn will end soon, which we’ll get into a bit later.

It pays to wait until the reversal. The market is likely to resume the growth of the early 2010s, as the underlying fundamentals remain strong.

Wealth for Life Property investment cycle
  • Facebook
  • Twitter
  • Google+
  • Pinterest
  • Gmail
  • LinkedIn

After all, property investment is a long-term endeavour. You shouldn’t let short-term price movements dictate your decisions.

3. The Media Often Overhypes Short-Term Decreases

It takes much more than a Google search to see what’s really going on in the property market. If you trust the wrong sources, you might make unwise decisions that can deplete your portfolio. Like many other things, the media tends to overhype price movements in the property market, especially if it’s negative.

The same thing is happening right now. While it’s true we’ve been facing a downturn for some time, it’s not as serious as the media makes it out to be. What’s more, it’s not as widespread either.

Sydney and Melbourne are certainly the least favourable markets right now. Still, the media breathlessly reports declines in these previous investor darlings without mentioning the big run-up in prices before the decline. You’d think that the two markets have crashed. When in fact Sydney and Melbourne are only seeing price drops of 1.48% and 5.93% respectively.

Since these are our biggest markets, people seem to think that they reflect a nation-wide trend. That isn’t the case at all.

Cities like Hobart, Brisbane, and Canberra are already showing some signs of growth, meaning that the downturn isn’t affecting the entire country. The situation isn’t as bad as the media portrays it, so make sure to turn to reputable sources of information instead of riding with the mainstream media.

4. There’s Evidence That the Market Will Recover Soon

As mentioned, no downturn lasts forever. Australian investors who worry about the current situation will be happy to hear that the decline is coming to an end. Many experts are predicting that the downturn will only continue for two years at the most, with some of them talking about an even earlier upturn.

Wealth for Life Property Investment Recovery
  • Facebook
  • Twitter
  • Google+
  • Pinterest
  • Gmail
  • LinkedIn

Nerida Conisbee, chief economist of realestate.com.au, believes we’re already seeing signs of an upturn:

‘It won’t get back to where it was in terms of 10 per cent-plus growth because if you look at how the landscape has changed, we’ve seen a significant pullback of investor activity. But it’s certainly a more positive environment than it was at the start of the year.’

Similarly, KPMG’s research shows that our toughest markets will start growing again in the next two years. According to their predictions, Melbourne will see growth in 2020 and Sydney by 2021.

Conisbee chalks it up to the activity of state and federal governments. Regulatory actions along with taxation measures should help the market recover fairly soon. Since the recovery phase generally offers the highest price increases, you wouldn’t want to sell before it happens.

5. You Can Ride Out the Downturn

Now that we’ve established that the downturn won’t last for long, it’s important to understand what it takes to ride it out. The fact that the market isn’t in a good place doesn’t make this strictly a waiting game. Rather, you need to find a way to get the most out of the current situation until it improves. 

Wealth for Life Diversify
  • Facebook
  • Twitter
  • Google+
  • Pinterest
  • Gmail
  • LinkedIn

The good news is that there are many ways to do this. It all boils down to diversifying your portfolio. As mentioned, there are many smaller markets that you can still profit from. This can ensure you don’t lose money until the market starts recovering.

Adelaide is a perfect example. Throughout the whole downturn, it kept going against the trend. Prices are still going up in Adelaide with no sign of changing soon. The City of Churches saw a 1.3% increase in median house price. At the same time, unit prices only dropped by 0.1%. This is negligible in comparison to the price drops we’re seeing in the biggest markets.

This goes to show that the market downturn isn’t as horrible as many investors seem to think. You can still profit if you play your cards right. Diversification lets you gain some immunity to the market volatility, so you should think in this direction.

The Long-Term Trend Remains Bullish

History shows that selling during a downturn is almost never a good idea. The Australian property market is no different. As much as many investors have lost their patience, we’re still only talking about a year and change of correction after years of price increases. This isn’t a good enough reason to jump ship.

This is especially true when all signs are pointing to a much brighter near future. The national property market is very likely to bottom out and begin its recovery soon, and you don’t want to be on the sideline for that. In the meantime, there are many things that you can do to ride out the downturn, and selling happens to be at the bottom of your list of options.

If you’re still uncertain, maybe it’s time to talk it over with people who have experienced such downturns and emerged with stronger portfolios?

At Wealth for Life, we are all investors ourselves. And we invest with the same strategies that we will be sharing with you. Strategies which we know to work.

Contact us and our experts would be glad to help you succeed in today’s market.

Market downturn is one of the scariest terms for many investors. See why this doesn’t have to be the case.


Wealth for Life Property Investment cycles
  • Facebook
  • Twitter
  • Google+
  • Pinterest
  • Gmail
  • LinkedIn

There are very few positive news stories these days when it comes to the Australian property market. Analysts who are bullish about the market are few and far between, drown in a sea of doom and gloom predictions.

It’s true that the market isn’t having its best days. Some of our biggest markets are seeing a serious downturn. But don’t forget that property prices had had a big run-up in the 2010s and prior to 2018.

Property investment is a complicated affair. An unfavourable short-term trend doesn’t mean it’s time to run as fast as you can. In fact, the opposite may be true if you focus on the long run.

Like most investment assets, the property market moves in cycles. This may just be a temporary correction, which always tends to shake out the weak-kneed investors. Their knee-jerk reaction to falling prices would be to get out as soon as they can. This is never a good idea for those who are in it for the long haul.

If you know where to look, you’ll find more arguments in favour of holding than selling. Here are 5 reasons to illustrate this point.

1. Panic-Selling Is Never a Good Idea


Wealth for Life Property Investment Fear
  • Facebook
  • Twitter
  • Google+
  • Pinterest
  • Gmail
  • LinkedIn

Warren Buffett famously said ‘When others are greedy, I am fearful. When others are fearful, I am greedy’. This reflects the current property market perfectly. Some of the worst investment decisions come from fear, so you need a cool head on your shoulders in times of market volatility.

You might see your fellow investors go out of their way to sell. Naturally, this will create an atmosphere of panic that drives prices lower and convinces other investors to cut their losses.

But, you need to know how the property market behaves, which leads to the next point.

2. The Market is Cyclical

Wealth for Life Property investment cycle
  • Facebook
  • Twitter
  • Google+
  • Pinterest
  • Gmail
  • LinkedIn

Every investor should know this basic macroeconomic rule. Markets are cyclical and go through stages of uptrend, plateau, downtrend, and bottom. What this means is that the downturn that we’re seeing will bottom out, and an upturn will follow.

It’s the classic ‘it’s always darkest before the dawn’ situation. As mentioned, weak investors flee and accelerate the decline. These noises in the market shouldn’t bother the smart, patient investors. There’s proof that the downturn will end soon, which we’ll get into a bit later.

It pays to wait until the reversal. The market is likely to resume the growth of the early 2010s, as the underlying fundamentals remain strong.

After all, property investment is a long-term endeavour. You shouldn’t let short-term price movements dictate your decisions.

3. The Media Often Overhypes Short-Term Decreases

It takes much more than a Google search to see what’s really going on in the property market. If you trust the wrong sources, you might make unwise decisions that can deplete your portfolio. Like many other things, the media tends to overhype price movements in the property market, especially if it’s negative.

The same thing is happening right now. While it’s true we’ve been facing a downturn for some time, it’s not as serious as the media makes it out to be. What’s more, it’s not as widespread either.

Sydney and Melbourne are certainly the least favourable markets right now. Still, the media breathlessly reports declines in these previous investor darlings without mentioning the big run-up in prices before the decline. You’d think that the two markets have crashed. When in fact Sydney and Melbourne are only seeing price drops of 1.48% and 5.93% respectively.

Since these are our biggest markets, people seem to think that they reflect a nation-wide trend. That isn’t the case at all.

Cities like Hobart, Brisbane, and Canberra are already showing some signs of growth, meaning that the downturn isn’t affecting the entire country. The situation isn’t as bad as the media portrays it, so make sure to turn to reputable sources of information instead of riding with the mainstream media.

4. There’s Evidence That the Market Will Recover Soon


Wealth for Life Property Investment Recovery
  • Facebook
  • Twitter
  • Google+
  • Pinterest
  • Gmail
  • LinkedIn

As mentioned, no downturn lasts forever. Australian investors who worry about the current situation will be happy to hear that the decline is coming to an end. Many experts are predicting that the downturn will only continue for two years at the most, with some of them talking about an even earlier upturn.

Nerida Conisbee, chief economist of realestate.com.au, believes we’re already seeing signs of an upturn:

‘It won’t get back to where it was in terms of 10 per cent-plus growth because if you look at how the landscape has changed, we’ve seen a significant pullback of investor activity. But it’s certainly a more positive environment than it was at the start of the year.’

Similarly, KPMG’s research shows that our toughest markets will start growing again in the next two years. According to their predictions, Melbourne will see growth in 2020 and Sydney by 2021.

Conisbee chalks it up to the activity of state and federal governments. Regulatory actions along with taxation measures should help the market recover fairly soon. Since the recovery phase generally offers the highest price increases, you wouldn’t want to sell before it happens.

5. You Can Ride Out the Downturn

 

Wealth for Life Diversify
  • Facebook
  • Twitter
  • Google+
  • Pinterest
  • Gmail
  • LinkedIn

Now that we’ve established that the downturn won’t last for long, it’s important to understand what it takes to ride it out. The fact that the market isn’t in a good place doesn’t make this strictly a waiting game. Rather, you need to find a way to get the most out of the current situation until it improves.

The good news is that there are many ways to do this. It all boils down to diversifying your portfolio. As mentioned, there are many smaller markets that you can still profit from. This can ensure you don’t lose money until the market starts recovering.

Adelaide is a perfect example. Throughout the whole downturn, it kept going against the trend. Prices are still going up in Adelaide with no sign of changing soon. The City of Churches saw a 1.3% increase in median house price. At the same time, unit prices only dropped by 0.1%. This is negligible in comparison to the price drops we’re seeing in the biggest markets.

This goes to show that the market downturn isn’t as horrible as many investors seem to think. You can still profit if you play your cards right. Diversification lets you gain some immunity to the market volatility, so you should think in this direction.

The Long-Term Trend Remains Bullish

History shows that selling during a downturn is almost never a good idea. The Australian property market is no different. As much as many investors have lost their patience, we’re still only talking about a year and change of correction after years of price increases. This isn’t a good enough reason to jump ship.

This is especially true when all signs are pointing to a much brighter near future. The national property market is very likely to bottom out and begin its recovery soon, and you don’t want to be on the sideline for that. In the meantime, there are many things that you can do to ride out the downturn, and selling happens to be at the bottom of your list of options.

If you’re still uncertain, maybe it’s time to talk it over with people who have experienced such downturns and emerged with stronger portfolios?

At Wealth for Life, we are all investors ourselves. And we invest with the same strategies that we will be sharing with you. Strategies which we know to work.

Contact us and our experts would be glad to help you succeed in today’s market.

Pin It on Pinterest

Share This

Share This

Share this post with your friends!

X