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Sometimes, I have a single, big idea to write about in this space.
Other times, it's a couple of smaller ones – or big ideas that I write about briefly.
Today, I want to do the latter: share with you my thoughts about a couple of slightly related topics, which I hope will be interesting and useful.
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The first is 'predictions'. Hopefully topical, given the time of year, when newspapers, starved of news, turn to 'experts' to tell the rest of us what the next 12 months will bring.
They are, as I hope you've read from me before, useless.
Because here's the thing: there are two possible outcomes:
Either the things everyone expects actually come to pass, in which case the 'predictions' are useless because everyone expected them anyway.
Or things happen that no-one expected, and the expert crystal-ball gazers say 'Well, no-one could have seen that coming'!
I hope the irony is clear.
Even those who are right, once or twice, tend to be wrong more often.
So why do we listen?
Because we're human.
Because we crave certainty and, if we can't get it, we'll happily (if usually subconsciously) accept a prediction instead. Anything to fill the void of uncertainty.
Worried the market might fall in 2026? Understandable.
Think it might rise in 2026? Understandable.
Know which one it'll be? Me neither.
Instead?
Instead, I try to think in probabilities. And in timeframes that matter.
I think it's probable that the market is higher in a decade. (I have no idea what it'll do this year.)
I think it's probable that high-quality, successful businesses will thrive over that time (though some won't).
I think it's probable that paying good (but not necessarily great) prices will mean the success of those businesses will make it more likely that shareholders will benefit from that success.
That's how I invest. With not a prediction in sight.
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Second, I want to just share some short thoughts on house prices. Or, more accurately, the influences on prices.
There are two, related, forces predominantly driving them.
The first is, unsurprisingly, interest rates.
The second, is the balance of supply and demand.
On the former, the simplest explanation is the question 'How much can I borrow?'
At a given level of income, the bank will decide you can afford to repay 'X'.
At a lower interest rate, a monthly payment of 'X' will mean you can borrow more, and therefore pay more for housing.
At a higher rate, you can borrow – and pay – less.
On the latter, it's pretty simple:
If there are 10 houses and 11 buyers, prices will tend to rise.
If there are 10 houses and 9 buyers, prices will tend to fall.
Now those are tendencies, not guarantees, but that's the broad market reality.
Cutting rates likely pushes prices up.
Adding to population likely does, too.
So do things like first homebuyer grants and deposit guarantees, and the like.
On the flip side, reducing population growth / adding to supply puts downward pressure on prices.
As does rising interest rates.
There are other long-term considerations like actual or potential tax changes, but assuming those remain stable, the two influences, above, drive prices.
Investor activity is also a component, but that's largely a subset of those two forces, too.
So what?
Well, that's probably for another article. And there are some policy changes that are definitely overdue, in my opinion.
But for now, it's enough just to highlight how and why prices might change in 2026 and beyond, and some of the levers policy-makers might seek to use if they ever got serious about improving housing affordability, rather than just talking about it and doing things that make it worse!
Fool on!
