For some people, the crash is always just around the corner. (Source: Yahoo Finance)
Most people who tell you the ‘property crash is coming’ aren’t trying to be annoying. They’re trying to feel in control.
This message has been seen over and over again. People say the Aussie property market is in trouble because property prices are ‘too high to keep going’, the RBA, or the latest scary chart, which is then followed by something around the fact they plan to swoop in when prices are down and pick up a bargain.
But the crash never seems to actually come.
RELATED
Waiting sounds like risk management or strategic investing, but in reality it’s a timing bet – and this bet is one that most people lose on. If prices rise, it’s easy to fall into the trap of telling yourself this must mean the crash is closer. And if prices actually do fall, it’s common to think there’s even more to come.
Either way, you’re stuck standing still while the market keeps moving.
Doing nothing is still a choice, and that choice comes with its own risk. If you’re sitting in cash waiting to invest into property, and prices keep rising, you don’t just miss out on growth. You’re effectively training yourself to wait even longer, because buying now feels like overpaying, even when the numbers stack up.
One of my clients in 2020 had their property deposit ready, but decided to be ‘smart’ and wait for the Covid property crash that never came. When prices started running higher, they doubled down.
Then interest rates started rising and property values started going down, and they still didn’t buy because they were convinced there was still more downside to come. Then the property market quickly recovered, and long story short, they ended up buying almost a year later at a meaningfully higher price than what they could have got if they jumped in when they were ready in 2020.
Even if prices fall, and based on the long term growth of Australian property that’s a big if, you still need to act. When markets are down and fear levels are higher, your confidence is hard to find – this is why ‘I’ll buy the dip’ rarely works.
To look at the real cost of waiting for the crash, it’s not just about the extra amount you pay or extra property value you miss out on today, it’s how that asset would have grown for you over the years and decades ahead.
For our client, they were planning on buying a $1m property in 2020, and by the time they eventually bought in 2024, the property market had increased by 32.5%. This meant that by spending the same $1 million in 2024, they effectively ‘missed out’ on $325,000 worth of assets.
Story Continues
The client was 35 at the time, so to look at the real cost, we need to look at how much more they would have by age 65 with $325,000 more property in their investment mix. Based on the long term AU property market return of 7%, that extra $325,000 of property would have grown to be worth around $1.89 million.
The cost of waiting can be seriously heavy.
Lately I’m hearing a new version of the property crash story, where people are saying that property is going to crash because of AI and its impact on the jobs market in Australia and around the world.
This week, a viral story from US investment research firm Citrini about how AI could end up driving up unemployment and gutting the consumer economy caused a number of stocks to sell off. So something is definitely in the water.
There’s no doubt AI is going to disrupt parts of the economy. But if it also lifts productivity (which we’re already seeing), the ultimate impact is that it tends to increase profits and wages over time. And as we know from 2020 and the Covid period, when people have more money, they tend to spend more on property – and this drives property prices up, not the other way around.
The old adage says time in the market beats timing the market. (Source: Yahoo Finance)
In a country where there’s a property supply issue coupled with strong demand, the AI crash seems pretty far from guaranteed. In my view, people sitting on the sidelines waiting for this to happen will most likely be left further behind once again.
The ‘property crash is coming’ story can be comforting because it gives you a reason to wait. But the problem is that waiting isn’t neutral, it’s a bet – and it comes with a real cost that compounds.
The real cost isn’t to predict what’s going to come next. It’s to build a plan that works even if the market does something annoying, like going up when you’d like it to go down.
Looking at what’s happened over the last five decades or so, a smarter approach with property starts to become clear. Focus on what you can control, like your savings rate, borrowing power, risk management strategy, and timeframes. Set your property strategy based on those inputs, not the latest headlines or tin-hat theories about what’s going to move the market.
If you’re genuinely ready and your numbers stack up, one of your biggest risks is sitting on the sidelines waiting for certainty. Markets rarely just hand out certainty, they just keep moving.
Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth. You can learn more about how to be smart with your money through Ben’s book Replace your Salary by investing.
If you want some help with your money and investing, Ben has created a free seven-day challenge you can use to get more out of your money you can join here.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.