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Thursday, October 22, 2020

Is Warren Buffet going to be wronged this time?

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What an irony, Property Market crash is getting predicted by banks who were responsible for one of the biggest crashes of financial and property markets, Global Financial Crisis (GFC)!

Once again non-prudent lending by banks has been the reason that has resulted in the tightening of credit and one of the key reasons for the slowdown in property market. Slowdown is not so much of a bad thing as it helps reassess the risks. The ongoing bullish moment of any asset class can alter our sense of reality. We start believing that markets will always go up and that is where mistakes happen.

Will the Property Market go down? Will Sydney become another Titanic? Is it only doom and gloom for the economy? Answer to these questions is anybody’s guess.

When you read through the scores of reports that are making rounds in the media, one can’t escape thinking this could be the truth. But is it? One of the fundamental reasons these reports are relying on is massive increase in unemployment, people not being able to pay their mortgages and delinquencies or foreclosures piling up. Factually stating Australian unemployment rate is lowest since year 2012 and some four months back Greater Sydney unemployment was almost at 11 year low.

Socrates saying,” If you want to be wrong then follow the masses” is quite applicable to the markets. If we follow this statement, then we should have sold our properties in 2017 when there was frenzy in buying and now start looking at buying when people are shying away from buying.

I bet, Socrates, father of Modern philosophy didn’t know if the markets will go up or down and even better over 2000 years later, we will be using his statement to decipher the mass psyche.

Truth is that information has diminishing value and masses move (take decisions) after information has been there for long enough. Let me show you how it is applicable to property market. If you get to know today that government is planning a new train station, it carries great value. A month later the plan gets concrete and information still has good value. When every newspaper decides to carry that story, same information carry less value and once the work starts the information has little positive implication on market. But we have often seen that masses fall for popular beliefs and wait too long.

Whether now is a good time to invest in property or hold for another 6 months?

If we go with one of the most accomplished investors of all time, Warren Buffet, he once said,” Be fearful when others are greedy and greedy when others are fearful”

Author – Vishal Gupta, Managing Director, Quarter Acre,
W: www.quarteracre.com.au
M: 0425 335 795
E: info@quarteracre.com.au

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