It is surprising that us as humans sometimes act so much like sheep. We like to think that there is safety in numbers and often think what everyone else is thinking is right. This is especially true when it comes to times of fear. People are always looking for something bad to happen and this “grass fire of fear” can often be ignited by the press. A few bad press reports and all of sudden everyone believes the market is bad and wants to sell. This sort of negative sentiment when it gathers momentum, can reach the dizzy heights of causing recessions. This is less evident in the property market but is really highlighted in the share market where things happening at a lighting fast pace and shares can be revalued instantaneous. This causes this asset class to be extremely volatile.
Deloitte Access Economics wrote a recent report which included the case of “fear of fear” being a major player in the influence of the property market and how this is currently impacting on the Sydney and Melbourne markets.
The lack of credit in these locations, high prices, low yields and the “fear of fear” phenomena will mean that Sydney and Melbourne will be a long time off a recovery.