What to remember when all you can see is falling property prices


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OK, here we go again. This is close to the 20th crack at my views on investing in the year ahead of us.

Now that I think about it, 2019 will be Money magazine's 20th birthday - who would have thought a magazine about money would go for two decades!

First, I'll cheer up our legal team no end by disclosing that my crystal ball is horribly flawed and I don't really have the first clue about short-term investment trends anyway.

falling property prices

I am not too bad at the long term. This is mainly because I am not very clever, and I am painfully aware that as I still work for a living my predictions can't be much good anyway.

So for the long term I rely on common sense. Fortunately, this seems to be in very short supply or I would be out of a job. I look at population statistics and the wealth of our population. Wealth comes from important areas, such as having a job.

Barring a nuclear attack, virulent plague or being hit by an asteroid, which I accept are all possible, the world's population is growing by about 93 million people a year.

Globally, the wealth of individuals and families is growing. We have made huge global inroads into poverty. We are also living longer.

The forecast for Australia is for a population of some 35 million in about 25 years. For us each year is a little economic miracle.

As we potter around with our daily lives we buy all sorts of goods and services. This is what runs the engine room of the economy. So more of us is good for investors.

Right now we all see falling property prices. This is long overdue and watching the media turn from "property prices to boom" to "property prices to bust" does cause me to laugh out loud.

I reckon the boom in prices went too far and we need a decent correction.

But what will prices look like in, say, 25 years? I argue they will be higher, much higher, due to population growth and the increasing wealth of our population.

So a weak market to a long-term investor is a great opportunity. Shares are having a bad time as well.

But, again, this for me is an opportunity. I invest on a regular basis, in particular into my superannuation, and right now I am buying more shares for my dollar.

We should pause for a moment and see what I said this time last year. I'll just do a cut and paste: "I do not see the property bubble bursting in our big capital cities but I expect flat prices there and in most of the country. I expect interest rates to remain low but with strong job growth and low unemployment I expect wages to improve. So I can't see rates going any lower, and as we move into 2018 I'll be looking for some small rate rises.

"The Aussie dollar remains a mystery to me. About all I ever get right is to see it as cheap when it gets close to 50c to the US dollar and expensive when it gets to $1 to the US dollar, so for 2019 I'll stick with a trading range of 65c to 75c. But I expect I will be wrong for reasons I don't yet know.

"Australian shares have underperformed other major markets, and while they are not cheap they are also not expensive. So I will continue to invest in shares and add to my portfolio, mainly in my super fund."

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.

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