Relying solely on AI for property decisions is 'unbelievably reckless and dangerous'

As the use of AI becomes more common in everyday life, it’s not surprising that some would consider using it to help with property investment.

Don’t.

While AI does have its benefits and can improve our lives in some ways, it represents a real danger for real estate investors.

We’re now in period of people using AI to do their thinking and make important decisions for them. In real estate, this means lazy consumers and real estate service providers are asking Chat GPT to tell them where to buy real estate.

Some might think this is smart - it isn’t.

It’s the opposite of smart. It’s unbelievably reckless and dangerous.

Anyone who is not prepared to put some time and some money into research should not be investing in real estate.

And those who are unwilling to use genuine research and knowledge should not be allowed to operate as real estate service providers.

If you hope to be successful, you cannot delegate knowledge, research and decision-making to artificial intelligence.

AI mistakes

The human element will always be all-powerful in the world of real estate and the key decisions that need to be made.

Real estate consumers need to be empowered with the right data to make informed decisions and unfortunately from what I have seen, too often AI gets it wrong.

AI programs are not at the point yet that they can evaluate the nuances of investing in real estate. AI just scours the internet for figures and spits them out.

If you ask ChatGPT what Australian property markets offer the best yields, you’ll get a list of locations where no one wants to invest.

Its top picks are Pegs Creek, in Karratha in Western Australia, and Moranbah in Central Queensland. Both are remote townships that rely heavily on the resources industry.

The history of Moranbah, Karratha and many other mining towns is littered with the carcasses of investors who bought in haste and repented at leisure.

During the resources investment boom (which ended in 2014), Moranbah had a median house price of around $750,000, although some very ordinary homes sold with $1 million-plus price tags during the peak of the frenzy.

Very ordinary homes were rented for thousands of dollars a week, while the mining companies were paying the bills – until they weren’t anymore.

Moranbah now has a median of $390,000 and rents are around $650 a week. There’s plenty of people who bought overpriced properties during the peak in Moranbah, who will never recoup their investment.

That’s why the human element remains important when it comes to property investment.

Having accessed all the available information, ultimately you have to make a human decision based on knowledge and experience.

I fear for the investors who rely on advice from apathetic practitioners who call themselves buyers agents, who in reality are just asking AI apps to tell them the best place to buy.

I doubt that people trying to make AI do the work for them will ever succeed – real estate has too many subtle and intangible elements.

Human judgement based on knowledge and research will always play a key role.