It is no secret that property markets – in fact, all economic markets – are driven by fear and greed.
During property booms greed is the dominant driver, but things have changed and now it’s all about fear.
Fear of the world’s economic woes spreading to Australia. Fear of taking on more debt. Fear of investing because the property markets might collapse.
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Fair enough. After all, any smart investor is going to opt for safety during a downturn. Right?
Actually, no. The opposite is true.
Most of Australia’s wealthiest property tycoons have made their fortunes by investing countercyclically, when everyone else saw doom and gloom and thought they were crazy to invest.
Why would anyone in their right mind follow such a principle?
Because, when you step back from the immediate, history shows us that the countercyclical approach always delivers the best results. It is, after all, the equivalent of buying at the bottom of a market cycle, isn’t it?
But what is clear to me is the huge gap between two kinds of investors.
On the one hand you have the lambs; on the other, the lions.
Lambs or sheep follow each other. They flock together. They follow trends. They are only comfortable with what is familiar. They seek safety and security in numbers.
And when it comes to property they are easily misled.
Why? Because they are easily impressed by the promise of quick gains, glossy brochures and advertising hype. They invest emotionally and this always has pitfalls.
Lions are different and, like their namesake, they are rarer beasts.
They don’t follow trends. They are independent thinkers that make decisions based on cold, hard facts, not herd-like subjectivity. They can stay calm while others panic. They are ready to look at numbers and rational arguments and make investment decisions based on these.
So what type of investor are you – a lion or a lamb?
Depending on what type of investor you are, or decide to be, the next year or two will either be a time of amazing opportunity or a period of fear and missed chances.
Let me explain.