Article ‘Who Benefits’ by Graeme Fowler written in 2002.
Disclaimer: Nothing is this article is meant to constitute financial advice of any kind, and is the opinion of the author only. Seek professional advice before making any financial decision.
Both of the quotes below are from a couple of newspapers during the week.
“Real Estate Institute president Graeme Woodley said people should buy now because prices were not going to fall. All indicators pointed toward the continuing strength of the market, with continued positive migration, a healthy economy and low unemployment.”
And this one: –
"Such a rapid rate of building in the face of slowing demand is a recipe for an oversupplied housing market and, consequently, falling house prices. While house prices are likely to climb further over the next six months, Infometrics predicts that property values will begin to fall before the end of this year.”
One says you should buy now because prices are not going to fall. The other one predicts that house prices will fall by the end of this year. Who's correct? Are either of them correct? Who knows for sure? I have said this many, many times to property investors before, that no one really knows what will happen in the market from one day to the next. I often get people ask me what I think prices will do, it can sometimes sounds like a broken record.
Naturally, I don't know any more than the next person does. But people assume because of my involvement in property that I must also be able to predict future market trends and prices – which obviously I cannot do, much to their amazement. Although many people claim to be able to do this with an array of often confusing & baffling data, historic statistics and other jargon, I am yet to meet anyone that can consistently predict market trends accurately. Even if there was such an enlightened individual, it would not be a given that their predictions would continue to be accurate anytime in the future. One thing to keep in mind is that whenever you hear any advice, opinions or see any articles written like, or similar to the ones below – always, always keep this in mind, and ask yourself: – "WHO BENEFITS???"
An agent that wants to sell more houses may tell their buyers that house prices are going to ‘keep going through the roof” and if you don't buy now, you are an imbecile and will miss out on all those capital gains, ‘you would be crazy not to buy now’. He may also tell his vendors that now is a great time to sell because you can lock in all those capital gains that you have achieved since buying your home, ‘if you hold on too long, you could lose all what you've gained.’ A mortgage broker may also tell their investor clients to buy more investment properties because prices will continue to rise, with the appropriate evidence to back it up. An insurance sales-person may on the other hand tell prospective clients that the market is about to turn bad and this could also affect businesses and no doubt employment (of course with solid evidence to support it) and hence want to sell their clients income protection insurance – after all, they could be made redundant. Investors themselves may even tell others and endeavour to spread the word that property prices will soon become stagnant or even come down, in the hope that what they are saying will have an effect in some small way. This would help them to buy properties once again at cheaper more affordable prices. It may seem odd to say or even think this, but if no one really knows for sure what the future holds, ask yourself – why would they be telling me this? Do they have their own agenda attached to what they are saying in any way? Other people may use their predictions and assumptions to sell their books, seminars, magazines, website services, publications, subscriptions or other information they have available, or even for simply the sake of being 'right' – as many economists will do. In another local newspaper I saw on the same day as the two excerpts above, five economists predicted the official cash rate would rise in January, seven said it would rise in March, and one said it wouldn't be raised now until June.
It is not always the case that the person or organisation behind these types of market predictions has their own best interests at heart. But, simply ask yourself before you take it as gospel that what they are saying is based on sound logic, reasoning, and a likelihood of being true; – is this information or advice in any way benefiting the author(s) of the material, and therefore the theories and opinions behind the information biased in any way? Is what they are telling me endeavouring to convince me to buy something from them, or change the ways I currently act or do things? Who benefits the most if I act upon what they are saying? What do they get out of it if I believe them, or if their predictions come true?
Always ask yourself this – who benefits the most if they persuade me to believe them??
Graeme Fowler
Disclaimer: Nothing is this article is meant to constitute financial advice of any kind, and is the opinion of the author only. Seek professional advice before making any financial decision.