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The problem with being short sighted

Property is a long term investment but all too often people get focused on the short term which prevents them from seeing the bigger picture. They focus on what is happening with the economy, or interest rates, or a change of government.

The classic example at the moment is the discussion around the mining boom.

Is it over? Commodity prices are slowing. Projects being halted. Jobs are being cut.

The graph above shows the longer term trend on commodities. Yes there is a correction at the moment but how does that compare to where prices were 10 years ago. You can also see the significant correction that occured during the height of the GFC in 2007 - 2008.

So when commodities priced were diving would have been a bad time to buy into regional areas connected to mining right? Looking at 14 of the key mining regions nationally the average annual growth over the last 3 years was 13.4%. Step back a little bit further to 10 years and the annual average was 14.12%. So if commodities prices come off for a period will this see a slow down in price growth in these areas? Most likely in the short term. But when demand for commodities increases again these markets will also bounce back quite strongly. That is the nature of these markets but the peaks and troughs do iron out over the long term.