If you made a prediction about what property prices would do in 2020, then odds are right now you’re going to be a fair way off.

Given the current environment that we find ourselves in everything that we thought we knew about what might happen in 2020 has been turned on its head.

The things that have happened this year have once again proven that people who predict or forecast what a property, a suburb or even an area are going to do are almost always going to be wrong.

Obviously a virtual shutdown of the economy could not have been predicted and certainly no one put that in their forecasts. But that’s the reason I don't like predictions and the truth is no one ever knows what tomorrow holds.

And that’s the real key lesson we need to learn when it comes to property investment.

When you're investing in property, it's such a large financial decision, you don't want to base your decision making on what is effectively just speculation. Because that is what predictions are - they’re just an opinion.

Let’s wind the clock back to the start of the year. The property market had started 2020 incredibly strongly, in the same fashion that it ended in 2019. We had high auction clearance rates in Sydney and Melbourne and property prices were steadily ticking higher each and every month.

That’s when we started to see all the headlines in the major newspapers and on TV, with all sorts of predictions for what numbers property was going to produce in 2020. I guarantee a lot of people would have based their investment decisions around what these ‘experts’ were saying and predicting.

Making Fundamentally Sound Investments

So how do we purchase property, without getting caught up in hype, speculation and worst of all wild predictions? We base our investment around what the area or the property has done in the past.

In business, this is not always a good indicator of future performance - but in property it is.

The reason for this is that as Australians, as a whole, we're not going to change where we want to live or why.

Let’s remember, the vast majority of home buyers are owner-occupiers who are looking for a property to live in. They’re attracted to locations that offer services and amenities that add value to their lives. Things like schools, shopping centres, transport, beaches and cafes. All those things that Australian families love.

Those types of fundamental factors don’t change overnight and it means locations that offer those types of factors will always be in demand.

If you can look at a property or an area that's performed consistently over the last 20 years, it's a pretty good indicator that the next 20 will do the same. Regardless of what is happening in the economy at the moment.

We see this all the time in good locations, with suburbs that feature things like in-demand school catchment zones. These locations not only increasing in value consistently but even doing so through periods when the broader property market or even economy is soft.

Clearly, it’s a lot safer bet to put your money in something that's performed for the last 20 years rather than putting your money in something that probably hasn't performed. Even if you're predicting that there's going to be infrastructure and population growth and all these other things that are very subjective.

Remember, property investment isn’t about reinventing the wheel. There’s a reason blue-chip areas show consistent growth over the long-term. And that’s not going to change anytime soon.


Jack Henderson

Head of Strategic Investment Division (SID)