Why 2016 is going to be a boom year

I predict that 2016 is going to be a boom year!

But before you start wondering what Michael’s “on” to make a comment like that, let me explain... I believe this is going to be a boom year for fright!

The media is at it again and there is no shortage of scary stuff in the press.

Things like - "House prices are unaffordable!"; "The world’s economy is stalling”; “Chinese money will stop coming to Australia and our markets will crash”; “Interest rates are rising, no they’re falling”, “Australia will go into recession"; "Kim Kardashian does it again!"

Of course just about every year is a boom year for fright.

As far back as I can remember there have always been scary stories in the media.

Also read: The alternative guide to Aussie property in 2016

And looking back over the years I have invested through many property slow downs, stock market crashes, periods of double digit interest rates and times when people thought housing was unaffordable or would never go up in value again.

Yet despite all of this the value of my properties keeps doubling allowing me to refinance and buy even more properties.

I remember in the late 1980's the cry was, "Don't buy houses... they can't go up in value. Your kids will never be able to afford them."

Then there were similar headlines in late 2003 and predictions of our property markets collapsing in 2008.

Just only a few years ago in 2011, when interest rates rose, the property pessimists were out again saying the property markets would crash. Look what’s happened since then.

Scary headlines

There always seemed to be scary headlines about a grim future which could have given me plenty of reasons not to invest in property.

Before the global warming crisis there was an over-population crisis with politicians, environmentalist and economists predicting massive food shortages, rioting in the streets, rampant cannibalism and an impending collapse of society.

I even recall a panic about global cooling.

Of course, the media gets more mileage out of this type of story.

They find it hard to get readers’ interest reporting on jobs growth, a healthy economy compared to other developed nations, strong population growth and twenty four years of continuous economic growth for Australia.

This is boring.

Also read: Seven factors that will shape the 2016 property market

Step back

To be a successful property investor you need to step back and take a big picture view and refuse to be scared by the next boogey man jumping out from behind the bushes.

The fact is, this week somebody's getting married, somebody's looking forward to having a baby, somebody's getting promoted, somebody's getting transferred, somebody's getting divorced.

A lot of people are happening to get rich.

This year close to 170,000 new households will be formed in Australia and they are all going to have to live somewhere. Those that can’t afford to buy, will have to rent.

This means the long term fundamentals, in fact the medium term fundamentals, for property are very sound.

And if you take a long term perspective, you'll be able to spot and act on opportunities that arise this year as many potential home buyers and investors get scared by this boom year for fright.

A year of opportunity

I see 2016 as being a year of great opportunity for property investors if they know where to look.

But remember - what you look for is what you see…

If you look for bad news, you’ll find it. On the other hand, if you look for opportunities, you will find them.

Our economy is sound, employment is growing (especially in the services sector), our population is increasing, interest rates are likely to fall further and the lower Australian dollar is encouraging overseas investment and tourism.

At the same time the fundamentals of supply and demand support growth in our three biggest capital city property markets.

However, decreasing affordability, changing sentiment and oversupply in several sectors such as CBD and off the plan apartments will create a volatile mix that will fragment and slow the markets - moving some from a seller’s to a buyer’s market.

Also read: Aussie house prices to drop

But the funny thing is that buyers don’t buy in a buyers’ market - yet smart investors do! They recognize that the market presents them with a smorgasbord of opportunities and they step up and take advantage of them.

Property price growth in Sydney and Melbourne will likely slow over the year, but median houses prices in these cities will be higher at the end the of year than at the start.

However, house prices will fall a little more in Perth and Darwin as the mining boom continues to unwind, while Hobart and Adelaide are likely to see continued moderate property growth, and the Brisbane property market should start to pick up further as it plays catch up over the year.

Nationwide price falls are unlikely before the RBA raised interest rates, which probably wouldn’t happen until 2017.

This means 2016 will be a good time to educate yourself and take advantage of the opportunities that this stage of the cycle presents.

While there is no need for fear - as always, while some people worry about the bad news and sit on the side lines, astute investors will set themselves up for the future by purchasing well located real estate.

 

Michael Yardney is a director of 

Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.