Watching Out for the X-Factor

What if I told you the single biggest threat—or opportunity—for your wealth creation journey could be something you never saw coming?

In the early 1980s—long before there was a TV show by the same name—economist Dr. Don Stammer taught me to always watch out for the “X Factor.”

These are the wild cards of the economy: unforeseen events or trends that suddenly reshape the landscape, leaving even the savviest experts scrambling.

An X factor, now often called a Black Swan event, can be global or domestic, positive or negative, but one thing’s certain: it has a profound, often immediate impact on economies and property markets.

Over the past two decades, we’ve seen plenty of them—from the devastating Global Financial Crisis (GFC) to the COVID-19 pandemic, from global wars to record-breaking migration levels.

So let’s explore how these X factors, big and small, have impacted the Australian property market and the economy at large.

The dual impact of X-factors

Some X factors are local—like government policy changes, interest rate hikes, or a surge in foreign investment.

Others are global in nature, stemming from geopolitical events, technological revolutions, or social upheavals.

For example:

• The near-meltdown of the global banking system during the GFC in 2008 was a black swan event no one predicted.
• Conversely, in 2020, the pandemic created a once-in-a-generation property boom, fuelled by record-low interest rates.

The lesson?

While it’s essential to take a long-term view, you must always prepare for the unexpected.

Protecting yourself by only holding quality assets, having a level of diversification, and having a “rainy day” financial buffer are crucial strategies for navigating the uncertainties X factors bring.

A year-by-year breakdown of X-factors

To help jog your memory, here’s a snapshot of some of the significant X factors, both domestic and global, from the last two decades.

2024

• Australian Factor: Record immigration levels and rising construction costs exacerbated our housing and rental crisis, meaning the many predictions of a housing market downtown did not eventuate.
• Global Factor: Rapid adoption of AI reshaped global labour markets, creating new uncertainties in job security.

2023

• Australian Factor: The RBA’s aggressive interest rate hikes significantly impacted household budgets, with many Australians struggling to manage rising wage repayments alongside elevated living costs.
• Global Factor: Persistent global inflation, spurred by supply chain issues and central bank policies, strained economies worldwide.

 2022

• Australian Factor: Multiple interest rate rises by the RBA to inflation caught many mortgage holders off guard, creating financial stress for those who had taken on debt during the previous period of record-low interest rates.
• Global Factor: Russia’s invasion of Ukraine shocked global markets, fuelling inflation and an energy crisis.

 2021

• Australian Factor: The fracturing of the long-dominant view of low inflation was here to stay. Also, work-from-home trends fuelled a regional property boom, changing property demand dynamics.
  
• Global Factor: The global rollout of COVID-19 vaccines provided a pathway to economic recovery, restoring confidence in many sectors despite ongoing challenges.
  However, this recovery was uneven across countries, with supply chain disruptions and labour shortages driving inflationary pressures worldwide.
  These factors, combined with pent-up consumer demand and stimulus measures from major economies, created a complex environment of rapid economic growth in some regions and lingering instability in others

 2020

• Australian Factor: The COVID-19 pandemic caused an unprecedented economic shock, with nationwide lockdowns halting businesses, disrupting supply chains, and forcing millions of Australians to work from home.
  Despite the initial uncertainty, record-low interest rates, government stimulus measures like JobKeeper, and changes in housing preferences triggered a once-in-a-generation property boom, as buyers sought larger homes and regional properties to accommodate their new lifestyles.
• Global Factor: The pandemic created a global health and economic crisis shutting down economies, grounding international travel, and disrupting supply chains worldwide. Governments and central banks responded with massive stimulus packages, including direct payments, business support, and record-low interest rates, to prevent economic collapse. This unprecedented response, while cushioning the immediate blow, also fuelled asset price inflation globally, with housing markets in many countries experiencing unexpected booms despite the ongoing health and economic uncertainty.

 2019

• Australian Factor: The unexpected federal election win by Scott Morrison boosted confidence among property owners who were worried that labour would bring in oppressive tax measures.
• Global Factor: Trade tensions between the US and China created uncertainty in global markets.

 2018

• Australian Factor: The Banking Royal Commission exposed widespread misconduct in the financial services industry, including poor lending practices and inadequate safeguards for borrowers. As a result, banks tightened their lending criteria significantly, making it harder for buyers to secure loans and reducing credit availability across the property market. This led to a slowdown in housing market activity, particularly affecting investors and buyers in overheated markets like Sydney and Melbourne, and contributed to declining property prices during the year.
• Global Factor: Escalating trade tensions between the United States and China created uncertainty in global financial markets, disrupting trade flows and impacting investor confidence worldwide. Simultaneously, ongoing Brexit negotiations added to the volatility, as businesses and governments faced significant uncertainty about the future economic relationship between the UK and the European Union.

2017

• Australian Factor: Property prices in Sydney and Melbourne reached record highs, driven by a combination of low interest rates, strong investor activity, and population growth, intensifying debates around housing affordability, with many Australians feeling locked out of the market and policy makers feeling increased pressure to intervene.
• Global Factor: Global financial markets experienced an unusual period of stability, with low volatility boosting investor confidence and supporting economic growth across many regions.

 2016

• Australian Factor: The surge in foreign investment in Australian real estate, particularly from Chinese buyers, continued to drive demand in major markets like Sydney and Melbourne. However, the government’s introduction of tighter regulations and foreign investment taxes in some states created uncertainty and began to dampen activity.
• Global Factor: The Brexit referendum, where the UK voted to leave the European Union, created widespread uncertainty about the future of global trade and economic stability, leading to volatility in financial markets. Later that year, the election of Donald Trump as President of the United States further unsettled the global economy, with concerns over his trade policies, isolationist rhetoric, and unpredictable leadership style introducing new risks for international relations and economic cooperation

2015

• Australian Factor: APRA introduced stricter lending restrictions to curb excessive risk-taking by banks, including a 10% cap on investor loan growth and higher capital requirements. These measures forced lenders to tighten credit, reduce borrowing capacity, and increase interest rates on investment loans, significantly cooling investor activity in markets like Sydney and Melbourne. As a result, many investors had to rethink or delay their purchasing plans, shifting the housing market focus toward owner-occupiers.
• Global Factor: China’s stock market crash wiped trillions of dollars in value, sending shockwaves through global financial markets and raising concerns about the sustainability of China’s economic growth. The crisis highlighted the fragility of the global economy, as China’s slowdown impacted commodity prices and trade flows, particularly affecting resource-exporting countries like Australia, which heavily relies on China’s demand for raw materials.

2014

• Australian Factor: A surge in foreign investment, particularly from Chinese buyers, drove significant demand for new and off-the-plan apartments, particularly in Sydney and Melbourne. The trend prompted growing public debate and government scrutiny, eventually leading to the introduction of foreign investment taxes and tighter regulations in subsequent years.
• Global Factor: Global oil prices plummeted from over $100 to less than $50 per barrel due to rising US shale production, OPEC’s decision to maintain output, and weakening global demand. This crash hurt oil-exporting nations but lowered energy costs for countries like Australia. While Australian consumers benefited from cheaper fuel, the mining and resources sector faced increased uncertainty and pressure from weaker global commodity markets.

 2013

• Australian Factor: Sydney’s housing market experienced the beginning of a significant boom, driven by a combination of historically low interest rates, strong population growth, and robust investor demand. The market was further fueled by a surge in confidence following the end of the Global Financial Crisis, as buyers re-entered the property market in droves.
• Global Factor: US Federal Reserve’s announcement of its plans to taper quantitative easing (QE) caused significant volatility in global financial markets, leading to what became known as the “Taper Tantrum.” This decision triggered a spike in bond yields and capital outflows from emerging markets, creating economic instability in countries heavily reliant on foreign investment, while also influencing global interest rate expectations and investment strategies.

2012

• Australian Factor: lowered interest rates to stimulate economic growth and employment, and this in turn boosted the housing markets.
• Global Factor: China’s economic growth began to slow after years of rapid expansion, leading to reduced demand for commodities and impacting resource-exporting nations like Australia. At the same time, the lingering effects of the European sovereign debt crisis continued to weigh on global markets, creating uncertainty and dampening investor confidence across the world.

 2011

• Australian Factor: Devastating floods in Queensland severely impacted the state’s economy, causing widespread damage to infrastructure, homes, and businesses. The disaster led to a temporary housing shortage in affected areas, driving up demand for rentals and putting pressure on property markets as rebuilding efforts got underway.
• Global Factor: the Arab Spring uprisings swept across the Middle East and North Africa, leading to the overthrow of governments in countries like Tunisia, Egypt, and Libya. These events caused significant geopolitical instability, spiking global oil prices and creating uncertainty in energy markets, which had ripple effects on economies worldwide, including Australia

 2010

• Australian Factor: The mining boom peaked, which drove strong economic growth and housing demand, particularly in resource-rich states like Western Australia and Queensland.
• Global Factor: The European sovereign debt crisis emerged as a major global threat, with countries like Greece and Ireland requiring financial bailouts to avoid default. This crisis shook investor confidence, created significant volatility in global markets, and raised concerns about the stability of the Eurozone, with potential ripple effects on economies worldwide, including Australia.

 2009

• Australian Factor: Australia’s economy showed remarkable resilience during the Global Financial Crisis (GFC), avoiding a recession due to strong government stimulus measures and continued demand for commodities from China. The property market also held up well, supported by the First Home Owner Boost, which drove increased activity among first-home buyers and helped stabilise housing prices despite global economic uncertainty.
• Global Factor: The aftermath of the Global Financial Crisis (GFC) continued to dominate the global economic landscape, with central banks and governments implementing unprecedented stimulus measures to stabilize economies. Massive quantitative easing programs and coordinated efforts to rescue failing financial institutions prevented a complete collapse of the global financial system, but the crisis left deep scars, including widespread unemployment and weakened economic growth in many countries.

 2008

• Australian Factor: Australia dodged the worst effects of the GFC with timely stimulus packages and bank guarantees shielding the Australian economy of property markets from the worst effects and allowing them to perform better than most other countries during the global financial crisis.
  Global Factor: The GFC brought the global financial system to its knees with a near meltdown.

 2007

• Australian Factor: the RBA raised interest rates 17 days pre-election creating political and financial tensions.
  Global Factor: The US subprime mortgage market collapse triggered a global financial crisis.

2006

• Australian Factor: Significant changes to Australia’s superannuation system were announced, including the removal of taxes on superannuation payouts for people aged 60 and over. These reforms incentivized individuals to contribute more to their superannuation, which had broader implications for investment behaviours, including increased interest in the property as a way to build wealth for retirement.
• Global Factor: Early signs of a US housing bubble raised global concerns.

Looking further back some of the factors were:

 2004 Sustained hike in oil prices

2001 September 11 terrorist attacks

1997 Asian financial crisis

1991 Sustainable collapse of inflation

1990 Iraq invasion of Kuwait

1989 Collapse of communism

1988 Boom in world economy despite Black Monday

1987 Black Monday collapse in shares

1986 “Banana Republic” comment by Paul Keating

1985 Collapse of $A after MX missile crisis

1983 Free float of the Australian dollar

Lessons from the X-Factor Files

Trying to predict X factors is futile—by definition, they’re the surprises no one sees coming.

But acknowledging their inevitability can help you prepare.

Whether it’s maintaining a diversified portfolio, sticking with quality assets, or taking a long-term view, these strategies can help weather the storm when the unexpected strikes.

Now it’s your turn: What do you think the next big X factor could be?

I wonder if when we look back at the end of the year the X factor for 2025 will be Trump’s tariffs?

About Michael Yardney
Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He’s once again been voted Australia’s leading property investment adviser and one of Australia’s 50 most influential Thought Leaders. His opinions are regularly featured in the media.