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Episode 17: The Herd Mentality – Do the Opposite

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4 Sep, 2020
Philip Robison

Terry and I discuss the state of play in the Australian Property Market namely the “Herd Mentality.”

We unpack the dangers of being part of the herd when it comes to real estate that by following the herd is a recipe for financial disaster. The problem with herds is that they’re not driven by logic or reason. Herds are skittish and prone to panic reactions.

There’s plenty of evidence that people who reject the herd have the greatest success with investment. One of the world’s leading investors, Warren Buffett (recently ranked the 7th wealthiest human, with a net worth of $US80 billion), has always preached an anti-herd approach. “Sell when others are buying, and buy when others are selling,” is his simple but highly effective mantra.

He also advocates taking a long-term view of investment. He says he buys good assets with the intention of keeping them. He’s an accumulator, not a trader. He says he doesn’t care if they shut the market down and it doesn’t reopen for five years, because he has no intention of selling the good assets he owns.

We take a look at how this applies to the Australian real estate market in September 2020.

Sadly the news has been overwhelmingly negative as media outlets have sought to milk the pandemic for clickbait headlines. This has been not only unhelpful, but often highly inaccurate.

Recent data on vacancy rates has been overwhelmingly positive for property markets – with most capital cities and also regional centres having very tight rental markets, putting upward pressure on rents and prices. But mainstream media has focused on the small number of negative figures, notably the high vacancies in inner-city areas.

We review what the mainstream media had to say about property prices. Who could forget the dour predictions in March of prices plummeting 20% or 30%.

How inaccurate was this not surprisingly with some areas experiencing price growth with limited supply. I share what is really happening out there in the market at the Coalface.

I share with the audience some examples that with some good research and creativity you can do very well when you adopt a long game approach.

Sadly too many will continue to rely on the mainstream media as their source of research which will see most of them buy at the peak and potentially lose money or pay too much for a property.

Terry and I reveal that the savvy investors are getting in now and buying while there’s a distinct lack of competition particularly in regional markets.

I leave the final word to Terry who says “ All Power to the Independent Thinkers.”

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