Australia’s residential property market moves in distinctive cycles that average between eight and ten years. The market has a number of driving factors continuously at play. Including housing supply, interest rates, population growth, and the often overlooked psychology of participating individuals. Tracking these will ensure you make solid investments. You will be able to measure the peaks and troughs in the long term performance of the property market.

The effect that the mental and emotional state of participating individuals has on the property market is not often explored.

Fear:

Fundamentally, it is fear that drives people the most. People’s confidence in the property market is fluctuating more than ever. Fear that coerces people into feeling pressured to make rushed decisions. Unfortunately, this often ends in regret.

When people are caught in the action-packed nature of an auction, they are often motivated by apprehension. Buyers outbid each other and drive prices well above average.

It’s wise to have a solid mindset well before you place an offer on a property. Rather than succumbing to the fears and emotion that stem from such competition. Prospective buyers need to clearly define their goals and have a strategic plan in place.

Following The Pack:

Our human tendency to follow the crowd. We are accustomed to a herd mentality. It is this conditioning of people’s psychology to follow others. In turn, it has an effect on the real estate market. People regularly buy and sell on hearsay and dismiss basic rules of property investment.

With auction clearance rates, house prices, settlement volumes, and the dollar value of settlements all recently showing signs of slowing down and decreasing[1], people are looking for direction. Needless to say, this type of information has, and always will, feature heavily in media. However, this coverage heightens people’s fear as they look to others for guidance on how to react and move forward.

Trend Setter’s Opinions:

It only takes a few out-of-the-box thinkers to start a trend. Established and savvy investors set the direction for what’s to come. Which often causes the property market’s upward shift.

Many years ago these investors were buying in suburbs throughout the country that many were shying away from. Now they are booming! Those investors had the educated foresight to understand the areas were going to change and gentrify before anyone else.

Eventually, this trend reached the public spotlight. By that time, established investors had already made their mark in the “new” area. This significantly drove up property prices.

Ultimately, Zaki recommends people question every source of information. People’s opinions are unavoidable and it is usually a handful of overarching voices that dictate the market. You must understand the psychology of investing. Educating yourself and being aware of all the factors influencing the property market will ensure you make sound investments.