The Elephant in the Room
The property podcast for the thinking person.

Episodes

Episode 170 | 2021 Fool or Forecaster Report | Which experts can you trust to get it right?

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The 'experts' who 'predicted' the property market crash that never happened.

Who could've predicted what happened last year? We began 2020 with high hopes and a positive outlook for the Australian property market, after the lows of 2019. Then came COVID-19, which threw everything we thought that was possible right out the window. Panic ensued and the real estate market came to a halt, especially in Melbourne. But as the year progressed and restrictions were lifted, the urge to upgrade and/or buy a first home became imperative, but vendors were concerned about selling in an unpredictable market. This led to a severe lack of supply.

Now, with Q1 of 2021 behind us, the property market is thriving with historic clearance rates and FOMO rampant across the nation. 

In this annual episode, we cover the experts and property pundits who were brave or foolish enough to forecast the year that was. Who got it right and who got it wrong? Which voices potentially impacted the market, and what role did the media play amplifying their opinions and even causing panic?

We hope to answer the question: where can you get good advice during a volatile situation?

THE EXPERTS’ EPISODES:

Roger Montgomery - Founder of Montgomery Investment Management

Eliza Owen - Head of Residential Research at CoreLogic

Louis Christopher - Founder of SQM Research

Shane Oliver - Head of Investment Strategy and Chief Economist at AMP Capital

Pete Wargent - International Buyers Agent & CEO of Next Level Wealth

Martin North - Founder of Digital Finance Analytics (DFA)

Stuart Wemyss - Financial Advisor & Author of Rules of the Lending Game & Investopoly

Nicola Powell - Senior Research Analyst at Domain

Saul Eslake - Former Chief Economist of ANZ and Bank of America Merrill Lynch

Warren Hogan - Former Chief Economist of ANZ

Superforecasting: The Art and Science of Prediction Paperback:
https://www.amazon.com.au/Superforecasting-Science-Prediction-Philip-Tetlock/dp/0804136718

HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: https://linktr.ee/veronicamorgan

Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au 

Send in your questions to: questions@theelephantintheroom.com.au

EPISODE TRANSCRIPT:
Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…
This episode was recorded in March, 2020.

Veronica Morgan: Well, a few days back, it was April fool's day. And do you know what we did on April fool's day?

Chris Bates: We released our annual full forecast report. We've been looking at all the predictions for the property market in 2020, and seeing whether they got it even vaguely right after all, what a year to be attempting to predict anything. Did anyone actually get it right? Who should we have listened to? Shouldn't we have listened to any of them.

Veronica Morgan: And I had a bit of fun researching more about how the elephant actually prevents us making good predictions. Now you can download our free 20, 21 full or forecaster report. Now on the website.

Veronica Morgan: Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent buyer's agent co-host of Foxtel's location, location, location, Australia, and author of auction ready.

Chris Bates: And I'm Chris Bates mortgage broker. Before we get started, I need to let you know that nothing we say on here can be taken as personal advice. We always recommend you engage in the services of a professional.

Veronica Morgan: Don't forget that you can access the transcript for this episode on the website, as well as download our free full forecast report, which experts can you trust to get it right? The elephant in the room.com did I, you,

Veronica Morgan: I think we all know that 2020 was a roller coaster. That was absolutely impossible to predict. Now let's break it down into three stages. Chris, do you want to give us a quick rundown of some of the forecasts made at each stage? We go pre lockdown, mid lockdown and post lockdown. Let's kick it off with pre lockdown.

Chris Bates: So I think it's a really interesting, because as the pre lockdown was the sort of start at 2020 and coming into 2020, the, you know, the market had really bounced back, you know, in the second half of 2019, and everyone was, you know, super positive, kind of like they had at the start of 2021. And everyone was predicting, you know, maybe, you know, five to 10% sort of rises, you know, different cities. But things very quickly sort of shifted right with, with COVID and everyone went to the opposite sort of direction and produce predicted falls of maybe, you know, 10 to 20%. And so it was a real, crazy three months where everyone was super positive to super negative in, in just such a short space of time.

Veronica Morgan: Look, I remember myself. I mean, it was a, it was a rare time when pretty much all the arrows pointing the same direction. Everyone agreed that that things were going to take off. And then I, you know, we were measuring clearance rates because that's obviously what we do in Sydney and Melbourne in particular. And they were in the eighties in the beginning of March and the 14th of March was where it suddenly bit. And we think, Oh, these COVID, thing's got some teeth is going to come to us. And yeah, we add always tracking all that and they sort of died very, very suddenly. And then of course they couldn't have auctions, so we couldn't have online auctions anyway. So as a barometer of measuring things certainly that was whipped, you know, the rug was ripped out from under us, but, and we'll go into sort of who, who said what and who got it totally wrong and et cetera, et cetera, et cetera. But I guess that when all the the fear hit the skids, you know, the market hit the skids, the fear took over everybody sort of completely about faced, but the post lockdown predictions, you know, except for Melbourne, of course, the rest of the country started getting back to some level of normality and then things started taking off. And, you know, was there a great variance in terms of who was predicting? What at that time, and I guess we're talking around June, July, then what did you see at that time, Chris?

Chris Bates: Well, I mean, I guess the, I guess a bit more normality was sort of coming back to, you know, everyone was kind of realized what would happen if, you know, there was outbreaks there be lockdowns and maybe the economy wouldn't fall off a cliff and et cetera. And so, I mean, but even still the, in that June sort of may time, there was still banks making, you know, pretty dire predictions. And I think that was the interesting point that I noticed. I thought the banks would be a lot more positive at that point in time. You know, you don't really want to create a frenzy with people selling. And so, you know, the banks are really often talking their book and talking it up rather than talking it down. But yeah, it was just, I guess, surprised that how negative the banks were in their sort of quarterly updates you know, the different banks, but everyone sort of bounced back pretty fast, you know, that June onwards and started to reverse their forecasts. And by September they, you know, people were predicting big rises and, and going into this year even bigger. So it was a really sort of a roller coaster really with the bank sort of predictions.

Veronica Morgan: I was actually, and I agree with you that, you know, the banks are a bit conflicted really aren't they, because, you know, a, they're such a major portion of our share market is the banks. And then such a major portion of their business is mortgage lending. And, you know, we all know that the, you know, residential properties are the single biggest asset class in this country. So, so much rides on the, the confidence and, you know, people, I guess, values holding, right? So, and confidence obviously is what pushes prices up and maintains values. But the RBA also were pretty diabolical and some of, some of their releases as well, weren't they, I mean, it wasn't, it was, it was like nobody in the financial market seemed to have a cool head at that time.

Chris Bates: Yeah. I mean, you know, amp shine Oliver was the same, you know, he was super positive at the start of 2020 came to COVID 20% false, you know CBA got a lot of headlines for, you know, one of their scenarios that said of 30% for RBA, same sort of thing. They said one of their worst case scenarios is a big sort of forward. So, you know, a lot of the media at this point in time where we're catching onto these big headlines you know, Louis, Christopher, obviously the, the doomsayers out there were having a bit of a field day at this point in time. But yeah, it, it was a really sort of scary moment where there was no real positive voices out there, but we did find a few, but you know, there wasn't many

Veronica Morgan: We will get to who was not predicting doom and gloom a little later, and we've got a few gold stars to hand out. So we weren't a steal at, we're not going to give you a spoiler as yet, but I think, you know, you raise and you've written about this in, in the full forecaster report, Chris, about the danger of scenarios, you know, that, you know, obviously the banks have got to run them and, you know, economists, run these things all the time and then they go to the media with them. So, so I guess what's going on there and why are they so dangerous?

Chris Bates: Oh, I've really struggled with these for many years where you know, doing financial advice who would build investment portfolios and there's a lot of organizations out there that build portfolios for advisors and you know, dealer groups and, you know, investment houses, et cetera. And they would also say, you know, the next year there's four different things that could happen. And it's 50% likelihood. This is going to happen. And 20% of these, you know, 10 and 10 or whatever. And I used to always laugh because it's like, where did they get that 50%? Right. And they were just like covering all basis. You know, this is things got really well, things go really bad. And well, they also thought that things were very linear and predictable when we all know if you go back every year or challenge yourself to go back every year and think, do you think what happened would happen?

Chris Bates: And you'll find that lots of things will surprise you and things will either go much better than you expected, or, you know, these big events, like, you know, COVID, or there's lots of, you can go back every year, Brexit Trump, you know where there's something that's happened that just completely changed the paradigm. So I think we, the problem with these sort of scenario analysis, they're too vague, then they have too much, I don't want to, I really don't know where they get the value, like the percentage of what this is likely to happen. And you also get stuck with, well, what do I actually place my bets on? Do I bet it on the most likely thing to happen or not? And you actually just confuses you as someone investing. But I think the real danger with that is they're kind of like dynamite or gold to the media because the media are going to look at that worst case or the best case, depending on where they want to angle the story. And CBA where, you know, sort of if you type, you know, CBA 32% for, into Google, you'll just see how much that one presentation got spread around the world. How Australia's biggest bank is predicting 32% falls to property prices when they weren't saying that at all, that was just one of their scenarios. They were actually suggesting maybe 11% at best. And so you can see how get taken out of context so easily.

Veronica Morgan: You know, we discussed that with Shane Oliver. I think he had scenarios ranging from, was it 5% to 20% from memory and exactly that he talked about, well, the media will let you onto the biggest. And I guess you've got to ask the question is why come out with this scenarios then if it doesn't really, you know, what they're going to do, and it doesn't really do anybody any good. So why do it, other than just getting your name in headlights?

Chris Bates: And I think this is, you know, Louis, Christopher, I was, you know, part of this research, we all or maybe not all, but we saw the bricks and mortar, which is a 60 minute sensationalized you know, property story

Veronica Morgan: Back in 2008, right. 2018. Yeah, exactly. 2018. Yeah.

Chris Bates: Yeah. And I mean, he spoke for them for an hour. He's wrote a blog on this. He said they they took out my five seconds and you've done media Veronica. I've done media before and the camera is just rolling on you. And then they just wait for that snippet and then that's what they use. And you actually don't know what they're going to use of what you say. So you know, and he got, you know, he didn't like our 60 minutes portrayed the one snippet, but that's what they're going to do. And I think he got caught out this year as well because one of his scenarios as a 30% for and that got perpetuated and sent across the whole market. So if you type in Louis, Christopher, you know, COVID or property downturn, you know, 30%, there's lots of articles on him, but that was only one of these scenarios. So, you know, I don't know if it's you know, like you say, you should be doing these scenarios if you know, that's, what's going to happen.

Veronica Morgan: And also, I guess one thing that I've learned, I mean, me personally, I've, I don't think anyone listens to this one now I don't have an economics background. I've got a property background for the most recent part of my career last 21 years, but on the ground very much on the ground and, and what the, one of the most wonderful things about this podcast for me personally, is a, we've been able to interview some of these amazing minds who aggregate data and then interpret it. And our economists in many cases, and are very skilled at actually running these scenarios in a professional sense. So they're trained to do so. Right. what I've learned is that the reason that they do these isn't actually to help individuals make property decisions. You know, they're, they're running these scenarios so much bigger purposes than then. You know, whether I should buy now or wait, whether, you know, whether I should sell my invest property or whatever. Whereas a lot of people who read these headlines are making a little micro decisions based on, on headlines, which are taking on the most sensational scenario of these, these modeling, which has been put together for completely different purpose. And I think that's one of the big, big dangers of, of these scenarios as well.

Chris Bates: I mean, you're so right. I mean, a lot of the, you know, Steve at the cook we've lots of different people sold us, like, you know, et cetera, you're right. They are economists and they are speaking Mack, mass market. And then people go and read a mass market publication, and then they take their one little snippet and then try to apply it to their situation. I mean, it just jumped off a call with a client and, you know, I completely confused with what to do, you know, conflicting data out there, you know, speaking to, you know, family work media their past decisions. And so it's, it's very tough to sort of get sense that these sorts of media organizations,

Veronica Morgan: I thought the episode that we had with Shane Oliver was really interesting. And I thought he was very generous in how he explained the process that he goes through in in coming out with these forecasts for anyone who wants to go and listen to that, it was episode 117, and we interviewed him in the height of lockdown or the height or the bottom of the pits of lockdown or the heart of lockdown, whichever you want to say. Now, and during that, that episode or during the interview, he did muse about the challenges that forecasters have in getting it right. And he did talk about the biases that forecasters are subject to in much the way we individuals are subject to all our, our, our behavioral biases when we make decisions about little things and big things. And, and I think that's a rather interesting, and I was doing some research as well for this report on, on really, you know, why'd, he, his predictions are so really, and yet why people keep making predictions given that they are predictably sheet.

Veronica Morgan: He's sort of a bit weird, really, when you think about it, you've got a massive probability of getting it wrong and yet doing it. And you know, there's a lot of biases that experts have in particular that the lay person doesn't have. And there's a, there's a lot of study being done in this. And, and one researcher has come up with these concept of superforecasters and the idea that, you know, you, there are ways in which you can obviously flex your, or exercise your forecasting muscles so that you can actually get a better. And Stuart Williams had actually pointed me in the direction of this in one of his one of his podcasts and it's a political scientist called Philip Tetlock, right? And so he's actually written this book called Superforecasting. And the idea that, you know, superforecasters can be created and predictions can be a lot more reliable.

Veronica Morgan: And when I sort of read some of the work that he's done, and then I went back and listened to the episode that we have with Shane, it's quite obvious that he must apply some of these revisionary practices that our superforecaster would would use. And, and obviously you know, he's looking at techniques for improving his predictions and, and there's that constant iteration, the constant, you get new information in, you change your forecast, you adjust your forecast. And I think that's one of the problems as well with, with the media is that they're not necessarily keeping up with the revisions. You know, they're probably still, you know, a lot of these economists and forecasters would probably have changed their position and potentially the press releases from the most sensational, recent set of models is still being used in articles. So the timeliness of it is something as well. That that is a real issue.

Chris Bates: Yeah. I mean, I guess, you know, at a point in time you could make a prediction, but then that could be our data to the next moment, that next day if new information comes in that, you know, goes against what you usually thought. I think one interesting thing. I did find that John Hampton, I used to work with him at platinum a long time ago and was always a bit of a quirky fellow. And now he's now runs a funds management business where he shorts, you know you know, companies or markets that he thinks you know, are overvalued. And he made some big calls around the property market about three or four years ago where he said, you know, 65% falls to parts of the Sydney property market. Because he went around and pretended he was looking to borrow money and spoke to brokers, but a little bit like the big short the movie.

Chris Bates: But he's just come out and literally, you know, in February, 2021 and said, look, you know, I was wrong. You know, I think the market's going to go up et cetera. And you know, I think that the good people who sort of know when they're wrong and they come out and actually say, and fix their mistakes because otherwise, you know, your people may be relying on your old sort of forecast or your old advice. And I think the reason why people do it is because, you know, unfortunately it's what people ask, you know, we get lots of clients asking us, well, where do you think things are going? What's going to happen here. What's going to happen there. And you know, and that's really a dangerous question to ask because anyone can tell you anything and could tell you whatever's in their best interests. Right. And so just be really careful asking that to the wrong people, that question.

Veronica Morgan: Yeah. Well, it's a classic example. If you get the wrong answer, you ask the wrong question, you get the right answer to a different question in a way, but the thing is too. I mean, when we spoke to a Lazaro and most recently, and you know, and asked her, what's the most common thing you're asked is are, where should I buy? And that's the same sort of thing. It's the top 10 areas for growth and all that sort of palava. And it is, I get asked the same thing, you know, homebuyer Academy, that's that's we got a little workshop on where to buy workshop, because it is the most common question that first home buyers ask apart from investors and everybody else. But you talk about the people that change their predictions. What about the people that never changed their projections?

Chris Bates: So, you know, I, I don't want to drag on these too much, but you know, cause they're already in a bit of pain, unfortunately. You know, there's lots of, you know, the Harry dance our good friend Martin North that has been on here a few times you know, they've all been predicting massive falls in property and you know, quite about them and calm every year, talking about how there's going to be big falls. And I've got big followings based on that and other things, but yeah, they, they, it's the same story. It's 40% in 2021 as it was, or 2020 as it was in 2018 and the number stays the same, but the market moves. So I don't know how that happens. Because if the market goes up 20%, maybe you should be falling 48% now, whatever it is. So it's a, it's always a funny thing to watch. So just be careful for them because at some point in time you know, they might feel like they're right, but unfortunately it's been proven again that that's not doesn't work like that

Veronica Morgan: With, with the perpetual dooms day is, you know, the real property bull, a bear, sorry, is that you know, they might be right in certain areas, you know, certain individuals, once it's almost like they've got this blanket quotes and yet some people will hurt and do hurt in property. And it's almost like some of them do. And I know Martin does focus very much on, on the areas where, which are the most vulnerable and you know, but there are also those that, that really don't seem to say this to change the story because they're piddling, whatever it is, they're peddling. I think you sort of point to Harry dent when you,

Chris Bates: Harry Dan is, I remember going to one of his I watched him live. It would have been 2011 or something like that. And it was called the great crash or something like that. And you had a new book out and it was a sort of a event that I was at and he was peddling the same stuff there. So what is it a decade later? And I've just seen, you know, when I was looking some numbers for this, you know, he's just three weeks ago, he was out peddling the same stuff, but it's going to be June, 2021 where this big crash is going to happen.

Veronica Morgan: Never, never changes. I guess they all sit around with every, every major catastrophe going, yes, finally, it's going to happen. But, and look, you know, I'm, once again, I'm not spoiling, but shortly, you know, we will get to our gold stars and there is one of those stars that I'm a little reluctant to give, because I think they're on the other side of the equation where the bear, like it's always positive, you know? So I'm a little reluctant to give that, but we will give it because you gotta be fair. You gotta be fair as we will. If ever the property market falls 40%, we will give a gold star to these people.

Chris Bates: No, that's very true.

Veronica Morgan: We do those our monthly suburb trends reports with Kent Lardner and E's made a few calls that actually we'll be putting in the 20, 21, sorry, 2022 report is to be preemptive to put in this report. But we started those, I think it was in July last year, wasn't it? And it's been quite interesting because, well, we've moved into looking at some of these hotspot lists every month and, and going through really what digging beneath the, the top line of it to say, well, what's, what's really in the data. You know, what do you have to, what can you find when you ask the right questions? And he's got a methodology based around inventory levels which is a bit of a lead indicator, obviously for what's going to happen in markets. But interestingly enough, you know, when you dig into the numbers and you ask questions, like, you know, look at low sales volumes and who, and what's driving prices and market composition and all those sorts of things you can see that you know, how you do need to have micro local knowledge in order to make good decisions and how these forecasts are really not very useful.

Veronica Morgan: But also what I think is interesting that once a location makes one of those hotspotting lists, you know, where all the signs are pointing in the right direction, the place is going to go off. Then there's very little time left to make a gain. So, you know, hanging around, waiting for people to make predictions and then base your decisions on that is, is really fraught with all sorts of, well, it's just not going to do really relying on pure luck for it to do any good.

Chris Bates: I always laugh at those lists because it's the headlines always like great places to invest or the best places to invest, et cetera. But it's, you're right. It's the places that potentially have done well over the last 12 months. And a lot of the time you can knock out a few of those because the medians not right or too small or whatever it is. So yeah, it's, it's those little always keep popping up. I know you've probably been asked for years to predict the next 10 locations, Veronica, so it's best to stay away from those things.

Veronica Morgan: It's actually funny. You know, I have been asked for years in, particularly when I was doing the show, of course, because you know that they are a bit higher profile than I have now, really, I guess, and that you'd be asked those questions and instinctively, I just, I wouldn't answer them anyway because I just felt that I didn't really have the answer because I knew my area intimately. And even then I couldn't choose, you know, which 10 suburbs of the areas that I know really well. It was just sort of felt ridiculous. So instant instinctively, I knew it was useful, useless, I should say. And then now through this podcast, we'd be doing this now for three years. I, I, can't, it's amazing how much I've learnt and how much more informed I am in refusing to do those, to give those lists. And I know exactly why not to give those lists now and take any notice of them now. One of the things I think should we talk about the gold stars yet? Or do you want to talk about your bouncing ball? You know, the, the, what happens with markets?

Chris Bates: I think it's, let's say the goal stars let's keep everyone hanging. I think the, you know, the bouncing ball is something that, you know, I think Roger Montgomery really explained it was when he said it. I was like, Oh, that's makes so much sense when he kind of explained it. And basically whenever markets go down less people want to sell. And so, because they don't want to crystallize their losses. And so liquidity dries up and that's exactly what happened in the 2018 sort of downturn in Sydney as process kept on for, and the quality of stuff kept on falling and the listings get falling. And so it was really hard to buy in that downturn, a quality asset because as soon as I did come on, there was, wow, Oh God, that's actually a nice property. Wow, they're selling now. And then all the buyers ran out, you know, the little herd went to that property and it went for a decent price.

Chris Bates: And you know, there was still stories when the downturn was in full swing of prices, still going at what they would have gone at before the downturn. And so we had clients miss out and I was, so that really was a, a key thing. And then it also explained to me that when things confidence does come back, they still have a liquidity problem. There's still not enough properties on the market. And then you get this influx of demand and confidence that people are willing to pay more than they were. And they're worried that prices are going to run them. And so then things bounce back really fast. And the, exactly the same thing happened in 2020. You know, we saw March, April, may, maybe, I don't know, in front of Patrick and may, would have still, would've been a good time to buy a reckon.

Chris Bates: It probably was pushing it. Yeah. And then bang, like June, we, our pre-approvals were started in, in may. We started to see a real uplifting confidence before the market, but you know, you really only had a month or two, maybe three to get a good deal. And that's, if you were ready and ready to go and had the confidence to bet against the market. So yeah. Trying to wait for these downturns and then trying to buy just almost impossible, even if you do wait for it, you're probably gonna miss it and things are going to bounce back

Veronica Morgan: The thing. And the problem is of course, you know, because I'm in these markets in, you know, year in, year out, I've seen that bouncing ball. You, you sort of feel it you're, you know, I know that in 2017 felt the market slowdown in may and the official figures bore that out in June. And that was so basically the, the bottom of the month also sort of the peak of the market was is well-regarded to be a June, 2017. And actually, I'm sorry, it's July. And I go back cause I, I write monthly market commentary for when we're doing price research for clients. And, and, you know, I've written in May, 2017 that we felt the market contract. And so, you know, and on the flip side of that same deal, I remember the first auction I went to, as soon as auctions were allowed, we, you know, obviously COVID was a unusual situation in the sense that only registered bidders could be present for this property.

Veronica Morgan: And there were seven parties there, you know, and I was like, wow, this is really interesting because every single there's no smoke and mirrors here, everybody knows that everyone else is here to buy the property. And, and that was a really different mentality to going to most auctions where, you know, unless you stand there and watch people register, which I do, you know, there's all these hangers on us and crowds and you know, all the rest it, and that you don't really know a lot of smoke and mirrors. This was like so much more serious in many ways because it was like, they're not here because they just want to know what the house is worth. In case we want to sell theirs down the road or whatever, these people are actually registered, they're ready to buy, you know, and it, and it was a real different, different vibe.

Veronica Morgan: And, and I thought all this, this feels different and it took a while to buy it, but it was definitely, you know, that was the early indicator that this was going to come back strong. Yeah. So, and I do also absolutely understand what re Roger Montgomery. And that was back in episode 73, if anyone was to go back and listen to that when he talks about that, the supply drawing up and that's basically it people then they can't buy anything and there's nothing to buy. So, like you say, when something good comes on the market, they there's, there's fewer buyers are unsure than there on a boom, but Hey, there's still a lot more for that one good property because they've been starved for it for long enough. They will go for it. So very, very interesting stuff. The other thing too, is that, I mean, I know we're doing the 20, 21 full of full custom report here, but what we're doing is reflecting on what happened in 2020 versus what was quite what was predicted.

Veronica Morgan: And I know the market turned in in May, 2019, and we know that the election, and we know that, that, that, you know, looking back, we now know that was the turning point, but I had actually done some research, not in April that year, that looking back to where you could peak the actual bottom of the market based on resales of individual properties. And it was December, 2018. And so it still took a good six months before it started showing in figures. And it probably nine months really. Cause it was really September before we started seeing the figures. So it is amazing how the market starts moving well before it's officially on the team.

Chris Bates: Well, that's right. There's a lag in the reports in terms of medians is a lag intensive. Even an auction could be four weeks in the market can move a lot in four weeks. You've seen that at the start of this year, how much things have moved since Christmas. And you know, what people were thought was possible just before Christmas is definitely not possible post-Christmas. And so the real consumer confidence bounce back was really interesting in 2020, where it went from, let's just call it a hundred, 110, you know, people are generally quite positive and then bang it, you know, 50, 60 at the height of COVID. And then, you know, not that long after people like, you know, what was going to be fine, let's get on with it. And people were confident and knew that things were going to get better. And know that was really surprising just knowing, you know, these big shock, but ultimately humans are resilient and they looking to get on with things. And it didn't take long for people to be back positive

Veronica Morgan: Only in Australia as well. I mean, there are other countries where the property market is, is astounded people and it's in its resilience and its in the turnaround, I was reading an article in Canada saying exactly the same stuff that that's happening here.

Chris Bates: Yeah. There's lots of countries. Yeah.

Veronica Morgan: Spot the economy. And it's it's because I guess where cash comes from isn't necessarily, I guess the lay person doesn't really know how to work, you know, and I certainly don't clearly not. 

Chris Bates: I spent quite a few articles that say, you know, why didn't the crash happen of 2020? You know, it was meant to crash in March, April may. And yes, there was things that have stopped that happening. The payment holidays without doubt was a huge thing to give people, you know, time to not have to pay their mortgages. And then obviously there'd be cuts in rates and the funding line, the RBA did to reduce right to borrow is you know, if you can keep paying your mortgage, you don't need to sell, if you don't need to sell the market, doesn't get flooded and then prices don't fall. So I think some of that, that action wasn't taken. Maybe we have a difference situation, the same as, you know, job keeper and those things. So yeah, if there's no government intervention, yeah. Things probably should have fallen and probably would have fallen a bit. But because of all those things that it stopped, that sort of doomsday outcome,

Veronica Morgan: And that is one of the things that Martin North talks about, he talks about. It is mostly talking about the areas we really, really high debt and mortgage stress, you know? And so it's focusing on those areas and, and you know, there's, there's yet the COVID cliff that the job caper cliff and the rest of it that could still happen, you know, in, in those areas. So I guess next year's report, we will be reporting on those predictions of that, that, and whether or not that happened or not. Okay. So our gold stars, should we talk about it does get to be boring, doesn't it? Because there are two gold stars two bright gold stars. I'll talk about this sort of slightly other gold star as well, but our two brightest gold stars are the same two gold stars that we gave last year.

Chris Bates: Yeah. So I spent hours and hours trolling trying to find people that were going against the grain. Speaking common sense, I guess not common sense, I guess it's not common, but at that point in time, you know, I guess looking at a different view to everyone else and, and you actually put it down in paper in national papers. Cause you know, you could do a blog on a website, but you're not going to find that. So I think short Williams is you came out in may. I think it was and wrote a very good article and why he believes that all the banks are wrong and that, you know, price is going for anywhere near what they're expecting and lots of different, real educated reason why. And I think that was really powerful because you know, people need those voices at those times to, you know, kind of wake them up a little bit. So I think Stewart hats off to you again, I think you spoke, you know, good sense at a time when people were very fearful and so you didn't actually make a prediction. I think it was wasn't predicted when the market was going to bounce back. When you spoke Veronica in December 20, he said, look, I think market's going to go up from here, which was a big call. So

Veronica Morgan: I remember that he got it right. But he didn't, he, he admits it, he got it right for the wrong reasons, which I think is pretty fabulous.

Chris Bates: Yeah. Yeah. That's right. Cause I think he's also thought the laborer going to win. Yeah. And so that's was a big part of it, the bounce back, but yeah, ultimately I think yeah, someone who's not there too is not really conflicted in his belief. He's just go, well, this is what I really believe. And I think that was was needed at that time.

Veronica Morgan: What's really interesting about Stuart and I have I'll confess to being a bit of a fan is if he's invest opoly podcast is a, is a really great podcast and we've had him on, we've had him on the show, I think three times now, in fact, in the last year we had him at the heart of COVID and also we've had him towards the end of the year episodes, 126 and 162, if anyone's interested because he is very evidence-based, he doesn't get emotional about this stuff. You know, he's very, very matter of fact, it's like, well, you know, I've actually sat down and I've looked at history, I've looked at the numbers. I've, I've analyzed this have analyzed that. And, and he's he's, he shows his workings if you like. And that's why other reason why I quite liked the fact that he might've made the right call, but it says he got it for all the wrong reasons.

Veronica Morgan: It's like doing your masters exam and getting the answer right. But actually working is wrong. He shows his workings. And I think that that's really important because he does have, he's one of the very few people who obviously understands the economy in a broader sense, he's a financial planner as well as a mortgage broker, but, and you know, he's certainly looks at the share market, is it looks, it doesn't just look a property. It's not a, it's not a property person per se, but he's one of the very few financial people who actually seems to understand the fundamentals of property and that that's a real rarity. And I think also that what it comes down to, he talks about evidence, but it's also it's human behavior and that's really fundamentally at the core of it. And this is where if, if one of the things that are, that are in my research around why forecasts are is basically I think it was Ross Gittens was writing about that.

Veronica Morgan: Economists are trying to use mathemat mathematical equations to as a, as a proxy or to predict human reactions. And it doesn't work that way. You know, you can't actually put everything in formulas. So, and I think that that's where we're, Stuart's quite interesting because he's very evidence-based, but, but it's, it doesn't have to be mathematical for it to work. It has to be, well, what has, what have people done in the past? What are they likely to do in the future? So and I think one of his, one of his podcast episodes, which I think I've referred to before, just a classic, it talks about all these unprecedented things and yes, they will have, they can have catastrophic impact. That just because it's, this is doesn't mean that our reactions are unprecedented the way in which we react to these big things is sorta predictable. And I thought that was pretty interesting.

Chris Bates: Yeah. And I think it's interesting with bricks and mortar and people look for safety at times and how property at times of, you know, fear is seen, as, you know, we've got to protect the house, we can't move out, you know, it's at home. So that stops a lot of stock. You know, people have seen great returns in properties, so they think, well, it's always going to go up. So then you get investors entering, which also supports the market and then interest rates and people are willing to say, well, now it's my time to upgrade. Or now it's my time to enter the market because I've been pushed out or my first home buyers. So now when things are great and you've always got this sort of other demand and low supply people not wanting to sell, they've got that inherent belief. And so these things really always play out. I think the other gold star, do you want to say,

Veronica Morgan: Oh, we will, but just, just to finish up on Stewart, since we didn't actually make a prediction in the sense that he didn't give a number, right. So he's quite careful not to stick his neck out like that. But what he did say is that it's not going to be, you know, the carnage that is being predicted that will not happen. It will be more resilient. And and that's why he is proven to be correct. And what it's, what's a wise proven to be correct. He has been proven to be correct, but he hasn't actually stuck a number on it. So therefore he can get a gold star because of that. And the other thought later on your personal favorites is Christopher joy.

Chris Bates: Yeah. So curse joy is cold at all. And you know, I think it's, we've actually tried to get him on the podcast multiple times. I can't get him on for some reason, but

Veronica Morgan: I sent him a copy of this report and the last, hopefully he'll realize you're a fan boy.

Chris Bates: Yeah. And I think he's why I think it's interesting is Chris runs a bond market fund or, you know, short term sort of funding options, you know, cash and et cetera. So I think he's got a very good understanding of the impact of interest rates and a very good understanding of the property market. You know, I think he was you know, something to do with the, you know, Howard days in the government who was advising on how to do a sort of home, you know, sort of scheme. He's been an analyst at the reserve bank, et cetera. So I think that that's, what's really helping his knowledge is the impact of credit and how credit drives human behavior. And you know, had drops in the interest rates, impact prices. And, you know, he's come out with a big call.

Chris Bates: He basically said, look, there's not really going to be any meaningful for maybe at best 5%. And he said that at the height, when things April, when everyone else was, you know, the market's going to crash 30%. So and it was in the AFR and there wasn't, you know, it doesn't hide from it. And even to start started 20, 21, he's wrecking 20 to 30% rises. So that's a big call. I'm looking forward to see how that one goes next year. But I think you gotta take your hat off. He has pretty much called the 2017, 2018, 2019, 2020. So hold on, Chris.

Veronica Morgan: Yeah. So that's, that's the other gold star, as I said, we'll come up with the third one in a minute, but with that, I'm actually personally a little surprised at the, what I think are quite conservative forecasts and predictions for next year, based on what is currently happening. And I don't know how long this run can, this run can go for, it will run until it runs out steam and it'll go down again. Like it will all the time. But I think the thing is that when, when catastrophic thing happens, big dramatic, unprecedented things happen, we all seem to think that the market stopped and that's it forever now, you know, it's like, and I know it's that sort of that catastrophic sort of thinking that we have, and I've had to pull myself up on here. So it's like, you know, this season eat for property in this country, ever the dust will settle and things will just kick on again.

Veronica Morgan: You know what I mean? And, and that does make me laugh a little bit. So the, the fairly conservative increases that are predicted by some, you know, like maybe seven or 8% for the year. I think, honestly, I'm seeing that in the first couple of months of this year. And I don't know, I mean, in a Sydney but the regional areas are in many cases out the scene demand will in excessive, even in inner Sydney. So in Melbourne, I he's back on the March Brisbane back on the March, you know? So, so we're seeing prices move very visibly week by week here, and that's pretty dramatic. So it'll be very interesting when we reflect on this next year to see you know, who who's, who's picked it in retrospect. Now, I think we need to talk about our other gold star.

Veronica Morgan: Now the gold star goes to Simon Presley. And the reason I'm reticent to give this gold star is because he's potential is sort of perennially positive about property. And so therefore it's impossible to get it wrong when the market goes up. And there's only a few people saying it's going to go up. And one of those people is a person that's always talking the market up, you know? And so that's why I'm a bit, a bit reticent to award the gold star, but I guess credit where credit's due. He did I did see an, a video that he put out at the very beginning of, you know, they've locked down. It was basically, it was titled safest houses and, you know, I watched it and I was, you know, I was thinking I was being quite wishful thinking. I remember at the time thinking to myself, I hope he's right.

Veronica Morgan: You know, I sort of turned out to be right. But the problem is that not every house is safe. Not every person owning a property makes money, not every person owning property, doesn't lose money. And we all know that. And so that's why I'm nervous about awarding the gold medal here, because it's not every, you know, the rising tide does not lift all ships and, and that's, that's that nuance that I, that I fail to see, I guess, in that sort of in those sort of claims, but he was talking about when everyone else, other than Stuart increase, we're talking it down.

Chris Bates: So, I mean yeah, I think Simon, we don't work with Simon's business. Maybe different aligned philosophies, I guess. But I mean, he's not always positive. He's very sometimes anti the capital cities. He says, well, Sydney has got no mama running it. And maybe you should be investing in this regional town because of these reasons and it's cheap and it's affordable and et cetera. So he does like to talk up the areas that they have buying, why they, why they're buying there. And then talk down the years that they're not buying and usually the capital city,

Veronica Morgan: Sorry. You're absolutely right. What I probably should have said. He's always talking it up somewhere. Yeah. That's actually what, the distinction that you've made there. And that's absolutely true. You, what you're saying is right. But it's like, there's always somewhere to buy. Yeah. That's what makes me nervous. Yeah.

Chris Bates: Yeah, exactly. And so I think you've just got to be very careful with those types of people. There's people who were always sort of use the spruikers out there will always talk the market up. I did find number of articles that we're doing that through covert and we haven't put them in there because of the reasons that we know the properties that they're purchasing for clients and they're recommending to clients are not great properties and they just have a sales pitch on why property prices will always go up migration under supply, you know, demographics you know, et cetera. And they just have this sort of spiel that they would just say we're forever and ever. And yeah, I don't think they're worth

Veronica Morgan: Now, if you want to listen to some of the past episodes over the last year about data and predictions, we recommend going back and checking out Saul S Lake that was back in 152 Warren Hogan episode 158, Pete warden, 118. That was one of our COVID episodes, Eliza Rowe. And clearly she is our favorite because we've had four times over the last year, 115 hundred and 3,559 and 169 plus she's back next week. Martin North, I think we need to get Martin back 143 and 123, I think. I'm very proud of our episode. Our first time we met Martin, you know, I really did think doll is going to be arguing with him the whole time, but it didn't turn out that way at all. And and so go back and listen to the first episode rebar.

Veronica Morgan: And if you want to find out why not, why we didn't do that, I don't have the number off the top of my head. And we also interviewed Nicola Powell from domain economist, chief economist from domain in episode 140. So, so we have had some really amazing guests that have shared some, some really fascinating insights, you know, over the year that not limited to these people talking about data and predictions, but certainly across lots of lots of the elephants that we do talk about and also the about trends episodes every month with Kent Lardner. Yeah.

Chris Bates: I think the big learning for me doing this report is yeah, be very careful to attach to this event that happens. I think that everything's going to change forever and don't get dragged into that sort of media hype. And I think that's but also I think the danger is just as much when markets are booming. We're seeing clients that are becoming frustrated really fast, you know, fed up because what they thought was possible is not possible. And they're starting in their brain to want to ease that pain, whether they're going to buy a poor assets and now we're buy a townhouse, not a house, or maybe we'll buy an apartment, or maybe we'll just do any, buy an investment property and give up on the home and can already say human behavior starting to shift because it's a tough market to buy and prices are moving, and that's not a good option because if you think my market's going to move, you know, 15, 20% in the next year, that will not be to all properties. Some properties will do a lot more than that. And I think some will still be the same price in 12 months time, if not lower. So just be very careful in, at the moment with the over-hype.

Veronica Morgan: So this is a big danger that it's all too hard and just give up and, or it's all too hard. I know I'll just go and buy something it's easy to buy or it's all too hard or just pay whatever. And, and it is a very different, difficult market to navigate. There's no doubt about that.

Chris Bates: Yeah. They're giving ops a really tough one. You know, or I'm going to wait six months to see how things go. And some things changed, you know, might lose your job or you might want to take a new job or a different career, or, you know something happens. You need to use that money for something. And so what was possible not only might not be possible because of the market, but it also might not be possible for your situation. So you've got to be careful gambling about what's possible today might not be possible tomorrow.

Veronica Morgan: She was talking to somebody very recently. Who've have been, it's been on the cards to upgrade their home for, for two years, they've had to sell a property. They've had to change things and get things organized. And it looked like they were finally ready. And then one of the change jobs, yeah. I was like, why would you do that now? Now you need to, after all that prep time now is not the time to do that. Now you need to go and get them properly, then changed jobs. Anyway, I was a bit surprised

Chris Bates: Your, a client very recently resigned. You know, didn't have another job to go to. And then there's this gap more than 30 days in their employment history, which banks are very nervous on at the moment. You know, they don't mind if he's swapping job to job, you know, there's a real sort of reason why you can do it. And it's very obvious. Maybe it's a pay rise. Maybe it's a better organization. Doesn't bank doesn't care. But if you have these gaps, they're a little bit more nervous on them. And so, you know, you have your 30 days plus then you need to pace. That's maybe they want you to go probation. And so you might losing six months out of the market, which could be five, 10% maybe, which is hundreds of thousands of dollars, maybe.

Veronica Morgan: So we just finished a phone and a Dumbo and a bootcamp in one little conversational chat there, the Dumbo don't change jobs. Now, if you are ready to buy a property and the bootcamp is if you're going to change jobs, how should you do it?

Chris Bates: Well, ultimately you really want to have a job to, to go to and, you know, be a similar industry. You don't want to be going from a dentist to on another job starting with D D but you know what? I made something completely different. Banks are switching onto that. And we also care for, if you're looking to buy regionally, we've had clients caught up, caught out where they're saying, I'm buying the place regionally, and I'm going to move there and work haven't actually signed off on it. And so you can't get pre-approval on a property sometimes if it's regionally and you say it's going to be a home to just be careful with things like that, because, you know, swapping jobs and buying properties in different locations banks are switching onto these things.

Veronica Morgan: What's the trick for young players. That one. All right, well, you can download your free 2021 full forecast report. Now on the elephant in the room.com did I use, that's a wrap for the 2021 report. There is more information in the report although our references and a lot more information around how forecasts are put together and why you shouldn't rely on them. So you could just listen to this and make your mind up, or have a read. Anyway, thanks for joining us.

Veronica Morgan: Join us for our next episode. One of my favorite topics, it's the pain and gain report. We have Elizer Owen from core logic joining us. And we're going to be talking about not one, but two of the last pain and game reports has September quarter, 2020 and December quarter 2020. What has COVID done to the property market across the country? What's the difference in terms of loss, making property sales, we're bringing it all to you next week, hot off the press. If you're looking to buy your dream home or an investment property in Sydney's inner West Eastern suburbs or North shore, my team, and I can help you by without regrets, reach out via my website. Good deeds.com.edu. If you're looking to buy your first time thinking of upgrading into a new one, or purchasing an investment property anywhere in Australia, my team love to carefully guide you on this journey. And most importantly, get the finance right, reach out via our website, willful.com today. Thanks for joining us. We're not to say you again, and remember, don't be a Dumbo.

Chris Batesde-index