Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

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Sunday, 25 November 2012

Property Update: The 80:20 rule in investing

How excited do people in Australia get about the prospect of a housing market crash? Take a read - extremely excited! And often extremely vindictive too!

It was widely stated that "anyone" who bought property in the lead-up to the financial crisis was extremely "stupid". Yet over the following years dwelling prices in Melbourne jumped by well over 50% and prices also boomed in Adelaide, Perth, Canberra, Brisbane, Sydney,  Darwin, Hobart and regional Australia. In other words, everywhere.

This was extremely unfortunate for those who sold their homes based upon infamous predictions that prices would fall by 40%.

Does that mean that property prices can't fall? Of course not. Anyone who tells you otherwise, I'd suggest you direct to the nearest available funny farm. Any asset which can increase in value sharply can also fall in value just as sharply, if not more so.

In fact, property prices did fall through 2011 and early 2012.

RP Data reports that dwelling prices over the past 12 months in Melbourne have fallen by 4.4% and in Brisbane they have fallen slightly by 0.8% (although year on year, RP Data reports price increases of similar magnitudes in Perth and Sydney).

And prices could retreat further, although I suspect that it may be wishful thinking on behalf of the doomsayers that they will fall back to where they were before the last boom.

Michael Yardney, whose property investment website I write for, says that "property investment is simple, but it's not easy". He's right. Articles such as the one I referenced above present perhaps one of the biggest hurdles for budding investors.

Every year for decades there have been those who say that prices are too high and that they will soon come down. And indeed, prices do come down periodically - it's what is known as a market cycle.

If you are to survive and thrive in the game of property investment, you need to be able to focus on where prices will be in 20, 30 or 40 years time - with increasing household incomes and population growth - and disregard to the market noise in the meantime. Easier to say than it is to do, mind, but that is what a successful property investor must be able to do.

The 80/20 rule

See this attached link for my latest article on Property Update on the subject of the 80/20 rule in investment.