History leaves clues – and the best investors know how to spot them

According to Mr Kumar, one of the biggest mistakes inexperienced investors can make is believing that present conditions will stay fixed forever. When COVID-19 caused interest rates to drop to 2 per cent, he noticed that “everyone was lulled into a sense of security, saying that at 2 per cent we can buy property we can afford”.

“Whereas Steve and I were advising our clients, ‘Hey, this is just temporary.’ Historically it [was] sitting at 5.5 to 6 per cent – and here we are,” he observed wryly.

Currently, market conditions are a far cry from the rock-bottom interest rates of a few years ago, but the trio believe that the same advice to learn from history still stands.

Mr Tarrant observed that today’s developers are burdened by sky-high construction costs, legislative chances and tightening rules from local councils. “This is all like a cauldron which is burning away, making it tougher and tougher and tougher for Australians to potentially buy real estate,” Mr Tarrant emphasised.

But is this current property crisis unique, or is it simply a repeat of the same problems investors faced in the past “dressed up a bit differently?” he asked.

Mr Kumar insists that housing crises are “never unique”. Despite the seemingly hostile current environment, his two-decade experience with market cycles assures him that “on the other side of this dark time in property” there will be “absolute sunshine”.

So, what lesson do the trio believe current-day investors can apply from history? The message is simple: “You need to act.”

The investors stressed that as labour and material bottlenecks continue, costs will continue to escalate and many people who have speculated on development sites will no longer be able to afford to build.

It might seem like cause for panic on the surface, but history has taught Mr Kumar to spot a hidden opportunity.

As an investor, Mr Kumar explained that he would go to all these developers who have been priced out of their properties and “pick them up”, ready to develop when construction costs decline again.

“We’re always looking for that tuck-away property that we can come back to at some point in time,” Mr Waters shared.

As Mr Tarrant explained: “Being a student in history helps you shape strategy.” Clues to the future of the market lie buried in the past – and the savviest investors know how to read them.

Listen to the full conversation in the latest episode of Property Investing Insights.