Michael Yardney | 22 November 2012

Why property investors should not be worried about values falling: Michael Yardney

Why property investors should not be worried about values falling: Michael Yardney

With flat or falling property markets around Australia for the last few years, many property investors are worried and wondering: "What will my property be worth next year?"

Every Monday they look at the auction clearance results, and each month they check on median property values. While it's not as bad as watching your shares fluctuate in value on a minute-by-minute basis, this short-term focus is unhealthy for investors, who are generally in it for the long-term.

I think a better question to ask would be: "What will my property be worth in 10 years’ time?"

The scary thing for some is that there are still commentators out there suggesting property values won't rise for another decade. “Just look at the financial mess the world has got itself into,” they say.

Then there are those overseas gurus who predict the world is about to go through an economic tsunami that will finally swamp Australian property, taking prices all the way back to where they were a decade ago.

Of course there's nothing new about these property pessimists – they've always been around, and they've always been wrong.

Look what happened over the last 10 years

 The value of well located capital city properties have more than doubled over the last 10 years despite the introduction of the GST in 2001, the dotcom share market crash, going to war in Iraq, a change in government, periods of high interest rates, periods of low interest rates and the world's worst economic downturn since the Great Depression.

I'm sure more Australians would have bought properties 10 years ago if they knew what would happen to values over the next decade.

Of course I don't know what's ahead in the next 10 years, but I do know that there will be just as many hurdles to jump over.

Australia is well-positioned for the future

 While many parts of the world are in economic turmoil, Australia's economic fundamentals suggest the next 10 years are going to be just as good, if not better, for property than the last 10 years were.

Our economy is the envy of most other developed nations, unemployment is low, our banking system is sound, our population is growing and on average we are the wealthiest people in the world.

Putting all this together means that property values are once again likely to rise significantly over the next decade.

But if history repeats itself, and it will, during that time we will have another property boom, a further property slump and most likely another economic downturn.

To safely steer through the next decade to the point where their property values will have once again double, strategic investors will need to stop worrying about the "market noise" and not be intimidated by the small stuff, like interest rate increases, tax issues and the negative news in the media.

Instead, they will need to focus on the big picture.


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