This week we saw a classic example of why it is important to take extreme economic predictions with a grain of salt.

In May, Commonwealth Bank CEO Matt Comyn came out with the statement that there was a possibility of the housing market falling by up to 32%. This week he reports that the bank now sees it falling just 6% from its peak. He was talking about national figures’

The issue I have with ridiculous statements like his May statement, broadcast from his ivory tower, is the level of unnecessary anxiety that it caused to many Australians who were already in a fearful state because of COVID. Particularly when the statement was just non-sensical.

Unfortunately mainstream media loves extreme statements like these and amplify them at every opportunity. This is because they need to continually scare us to keep our attention on them so they can then say to advertisers “look at the size of our audience, come and advertise with us”.

Here are a couple of tips to help try and understand what is happening to a property market:

  1. Ignore national statistics. There are hundreds of local property markets in Australia affected by local factors. Look at the performance of the local market you are interested in.
  2. Look at what is actually happening not what might happen. Understand the local factors and the motivating psychology of the buyers and sellers.
  3. Property owners tend not to sell when times are uncertain. This underwrites a property market through limiting the supply.
  4. Ignore extreme predictions. Mainstream media loves quoting extremists and they never get it right. Google Steve Keen.
  5. If you need a barometer of sentiment of what is happening, watch the Melbourne and Sydney metropolitan property markets. They roughly run in parallel and are the two largest property markets in Australia.
  6. Ignore any media articles with the word “could” in the headline. This is a rule to live by if you want to reduce anxiety in your life. “Could” is a very dangerous word in the wrong hands.
  7. Common sense is still a valid principle despite the fact that it is continually under attack by those without it.

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