Far from the madding property crowd

1st Jul 2015By: Margaret Lomas

If you really want to know what’s happening next in the property market – just read the media.

Be it in a newspaper, a magazine or fresh onto your iPad, the mainstream media misreports facts so frequently, and with such fervor, that it’s no wonder that their myths seem to magically become fact so often.

We live in a world of instant answers to the many questions we have, and these days, so many people rarely question the validity of the facts before them. We read the reports and suck up the information as if it were an informed forecast of the future or a fair and equitable reporting of the truth, and no longer question sources, slants, and facts.

Once upon a time

In the olden days, newspapers reported news of events that had already occurred – often days later after facts were carefully collected, sources analysed and stories prudently crafted to accurately report the event. Now though, much of what we read is a dissertation based on airy-fairy data, extrapolated out to represent future events, then reported as if these events are a sure thing.

Nowhere is this practice more prevalent than in the property industry, where daily we read of future booms, busting bubbles, oversupply, shortage – if it’s about property it will be predicted and reported upon, often using the interpretation of a journalist who is most likely an excellent journalist, but not even the shadow of a property expert.

And the saddest part of this phenomena is that, like any self-respecting prediction, the ‘forecast’ event or fact becomes a self-fulfilling prophecy, as property investors everywhere take counsel and guidance from these often baseless reports and plan their entire investing strategy around them.

We see less of this on the share-market – that world is too fast paced to forecast, with T+3 meaning the tides can turn quicker than a newspaper can be printed, making any story about the future too easy to prove or disprove before the ink is dry. Yet where property is concerned, there is never any shortage of growth data, quickly consumed and then spat out by journalists to form a prediction of future events.

Which is madness, when you think about it, because as far as property is concerned, past growth is no indication of future growth! In fact I would go so far as to say that, in many areas, strong past growth is a sure fire sign to stay away – because you’ve missed it.

The boom boys (and girls)

Two years ago the media began predicting a boom in Sydney. It seemed to many to be an easy guess – so little had happened for so many years that it was well overdue for a catch up – but is this why it boomed? Or did it boom because of the copious amount of media stories stating that it would? Did the market move because it was value driven, or did it move because we were told it would, and everyone panicked that they would miss out, making it happen?

Now we see the pundits predicting the popping of the balloon – with dire warnings splashed across the headlines of the bloodbath to come. I’d like to bet that enough of these stories will make the average, risk averse property buyer take cover and hibernate till the worst is over – once again causing another flimsy prediction to come true.

This is why I stay away from much of what is reported on property markets – the ride is too nail biting and even I’m guilty of panicking whenever I see another dire headline. For me, it’s just so much better to find an ordinary area, filled with ordinary people, who live in ordinary houses away from the madding crowd, where families flourish and councils provide a great lifestyle with infrastructure and services and where no one is interested in writing a property story because it’s all too ordinary.

And you know what? So far I’ve hardly bought a property that hasn’t doubled in its first five years and given me a great starting yield of at least 6%. It’s terribly ordinary, I know, but it’s easy, low risk and, even better, a darned good strategy.