What I Learned from the GFC that Every Investor Must Know

What I Learned from the GFC that Every Investor Must Know

For those of us who were around at the time of the GFC in 2008, it almost feels like a déjà vu. 12 years ago, we faced the Global Financial Crisis which came in like a storm and rained heavy damage on the stock market, wiping millions off investor funds and profits overnight.

Now, we are faced with the COVID-19 pandemic, however, let me share with you what I learned from the GFC that every investor should know: Don’t panic! This storm will pass too, and we can help you bounce back even stronger than before.

First, let’s be reminded that the Australian residential property market has historically fared well and demonstrated resilience against negative economic shocks. Research on the annual median house price and index data from the 1970s to the GFC indicated that five years after each recession or economical downturn, house prices in the capital city saw solid growth^:

  • 1973 to 1975 Recession – Sydney median house prices increased 100% after 5 years
  • 1982 to 1983 Economic downturn – Melbourne median house prices grew 67.7%
  • 2008 GFC – Sydney led the start of the property boom within 5 years

 

Home Value Index - Annual Growth Rate GFC & Royal Commission

 

History tells us that Australia is in a strong position to withstand the economic impact of the pandemic, as one of the few countries in the world that has a low government debt and a balanced budget. In fact, the disruption will be likely short-lived, with investors jumping in to grab opportunities and simulate the economy quickly. The recovery will come like every time in the past, most likely in a V-shaped form.

 

This storm will pass too 2

Is this a good time to “Jump In”?

As always, the best time to invest is NOW. However, using property investment to help fund your retirement years requires a careful balance of ‘capital growth’ and ‘income’ so make sure you’ve done your research or enlist the advice of a professional. All too often, novice investors target areas that fail to find this balance, leaving them either drowning in unsustainable holding costs, or buying cash flow positive properties in high risk markets.

 

What property will perform best?

The rules that you would apply to buying a family home are very different to the checklist you should use when filtering a great market to find the best performing rental properties. Purchasing a great investment property is like interviewing potential employees, and as such, you need to stay aware of the job you expect this property to perform for you. Your goal should be se-cure the most reliable investment, not the property you would pick as a family home.

Don’t ‘jump in’ blindly! Here at CPGP Investments, our team of professionals have the skills and experience to provide a framework that delivers comprehensive property solutions and is proven to maximise growth. We help you identify the best locations to purchase investment property during this recovery period, with an easy process that allows you to take control of your future and discover the potential of property investments, providing wealth and retirement funding.

Get in touch to see how we can help you get started today.

^Source:
Research conducted by PIPA (Property Investment Professionals of Australia)
https://www.pipa.asn.au/

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