10 Economists = 12 Predictions (but only 1 gets published)
Updated: Jun 27, 2020
Sorry for the headline if you are an economist 😃. The real thrust of this blog though is more about the reporting in the media of economic outlooks and predictions, specifically as they pertain to the real estate markets.
Firstly, in my experience media reports are almost always a lagging-indicator of what is actually happening in the market. In other words, they are generally behind the game and reporting what people in the market already know. And not just by days or even weeks, often it is by months. In generating their stories media outlets generally use data that tell us what HAS happened rather than what IS happening.
Selling agents, buyers agents, letting agents can all pretty much tell you the weekend a market changes and people suddenly stopped or started coming in numbers. Mortgage brokers can possibly predict even earlier as their enquiry numbers change. But by the time it appears in the Sunday papers .. the boat has sailed.
Fun Fact: The ABS published the June Quarter (1 April to 30 June) Residential Property Price Index on the 18th September.
However, when the media does forecast, it's always the sensational economist that grabs the front page. And this gets back to my headline. At any given time there must be 100 professionally qualified predictions of where the property market will be in 6 months, 1 year, 10 years. The range is wide too, especially when you look 12 months or more ahead. Up 10%, down 40% and everything in between. We all know which of these made recent headlines.
"HOUSE PRICES TO PLUNGE 40%"
In twenty five years working in the industry, I think I must have seen twenty such predictions but here is what the market actually did:
So, the moral of this story is to stay aware of the economic forecasts but don't be ruled by the headlines. Interest rates will fluctuate, government policies will come (& go) and the property market will at times fall, but history tells us that it will inevitably perform.
There is always opportunity in great property. Find it. Buy it. Love it!
Post Script: There is a story of a university economics lecturer who in 2010 not only predicted a 40% drop in Sydney house prices within 12 months, he doubled-down and sold his Surry Hills home. Although 2010 wasn't a boom year, after agents comm and stamp duty, it didn't worked out well!