An Economists Heartache

Written by Paul Kounnas Wednesday, 22 February 2012

Real Estate Information

Economists keep telling us how bad things are and how much worse they are going to get. However history shows that economists have been making the wrong forecasts for years.

In today’s instant information age economists have access to the latest data, statistics and all the research they need at the click of a button. Why do they still continue making the wrong property forecasts year after year?

To be fair, not all economists have been predicting that the property market is in a bubble and about to burst. But a significant number of them have and these are the ones we tend to hear the loudest.

The media loves bad news, so predictions of doom and gloom generate many more sensational headlines, while good news hardly gets a mention.

Here is why I think many economists consistently get the property market wrong.

Economists work with numbers, they analyse statistics and figures, look at past graphs and trends before formulating an opinion based on all this historical data.

Market movements however are not an exact science and no one can predict the future.

The economic fundamentals are easy to understand and analyse but the property market is driven by more than just the fundamentals. Investor psychology and market sentiment play a major role and explains why the market goes through cycles.

Whilst the long term performance of property is driven by the country’s economic fundamentals, its short term performance is influenced by consumer confidence.

I have been in real estate for over 30 years and I have not yet met anyone who can consistently and accurately predict the future.

If you stick to a proven investment strategy and buy property that is well located, you should see the value of your investment grow over time.

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