COMMENT: Fear, in the right proportions, can be a catalyst for beneficial behaviour. It can protect us from danger, deter us from unwise actions, and make us think about consequences.
But fear can also harm us. It can prevent us from doing things which will advance us and, if used by others against us, it can stop us from taking any action at all and, in extreme cases, can cause us to put life on hold.
The latter was spelt out, recently, in an excellent article written by former Prime Minister John Key in which he outlined five ways to transform our approach to Covid 19 in order to get our country moving again. Referring to NZ in 2021 as a “hermit kingdom”, his article rejected the fear-based approach of the current Government and proposed measures that would encourage vaccination and manage our response relative to the scope of the actual (rather than imagined) threat.
Fear is also an ever-present feature of the property market and, as with Covid, it drives behaviour in ways which can do huge damage when it gets out of control.
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There are at least three ways in which fear influences the property market, some more consequential than others.
1. Fear of the consequences of government intervention.
Despite their effectiveness in using fear to control our response to Covid, the same approach hasn’t worked for the Government in its attempts to control the housing market, which is why I’ve listed it first. Decades of history teach us that government and Reserve Bank policies may unsettle people enough to move the needle for a few short weeks or months – but that, ultimately, they will make no appreciable difference to the trajectory of the market in the medium and long-term. We’re witnessing this, right now, in the wake of a suite of changes which were claimed would slow house price growth to near-zero – at a time when house price growth has rarely ever been higher.
Ashley Church: “Don’t let the fearmongers steal your future.” Photo / Ted Baghurst
2. Fear of missing out.
The fear of missing out on a property is a far more pervasive influencer of the property market than government policy. That’s not my opinion – it’s the verdict of the market, itself, which over the past 50-plus years has seen repeated cyclic booms leading to ever-increasing house prices. The fear of missing out, coupled with the expectation of capital gain, are the two fundamental drivers of the New Zealand housing market.
3. Fear of a market crash.
Of the three fears listed, this is the most destructive. I could fill volumes with the stories of people who held off buying property because they heard or read that the market was “about to crash”. Despite the occasional claim that I have some sort of vested interest in “talking up the market”, the exact opposite is true. I have taken my own advice over the decades and have put myself in a position where I will be very comfortable for the rest of my life – and it saddens me to see so many young people missing out on being in the same position simply because they have heeded the advice of those who peddle fear.
Like Covid, the property market comes with risks that we should be aware of and should mitigate against. But there’s a big difference between acting with caution and being too scared to live.
Don’t let the fearmongers steal your future.
- Ashley Church is a property commentator for OneRoof.co.nz. Email him at ashley@nzemail.com
