When is the best time to buy?
By Rich Harvey, CEO and Founder propertybuyer
Most world records and all great comedy rely on one key element.
Many would argue this is also critical to successful property investing, but let’s take a moment to ruminate.
An entire industry has grown around the concept of buy-low, sell-high with those touting their gypsy-like market-reading credentials as a sure-fire way to purchase real estate when a market is about to enjoy a big upswing in values.
When discussing property, the characteristics of booms, busts, bubbles and stagnation become evocative keyword banter that can have observers arguing from one end of the spectrum to the other about whether you should, “Buy! Buy! Buy!” or “Sell! Sell! Sell!”
I have a contrary position that some will find disagreeable – investment success has nothing to do with timing the value peaks and troughs of the market.
Missing the big picture
Property, like all asset classes, has a market value which is determined by agreement between a buyer and a seller engaging in an arms-length transaction.
While this price should be the benchmark on what to purchase and for how much, sometimes a buyer will pass up a certified bargain because they didn’t realise that for long-game investors, timing has less to do with the market, and more to do with your individual circumstances.
A colleague once described the first home he and his future wife bought together in the blue-chip Brisbane suburb of Paddington.
This was early 2005. Brisbane’s market had cooled after a very hot 2003 and slowing 2004.
They’d done their numbers on the three-bedroom renovator’s delight and determined a market value, but decided to push their upper-price limit a a little because:
a/ they could afford to, and
b/they trusted the location and the ability for houses to see great long-term capital appreciation.
Our couple prepared to go as high as $382,000 despite feeling market value sat at around $370,000 to $375,000.
It was down to our team and one more buyer moving in $500 increments – and the pace was frustrating.
Suddenly the under bidder yelled, “$367,000!” before muttering, “and not a penny more.”
Our team lobbed in and bought the home for $367,500.
That property is now worth in excess of $800,000, and has rarely been without a tenant.
It’s also set a foundation for the couple to build their multi-property portfolio.
My colleague says he often wonders whether that under bidder looks back in regret.
I guarantee she does because property with the right fundamentals and a history of reasonable, long term capital growth always wins out.
Time in the market (not timing the market) will forgive most bad decisions, and when buying a quality property, is rare to make a lousy choice.
Readjust your thinking
Timing in property should be about your capacity to purchase, not a suburbs position on the property price clock.
Smart investors know that there isn’t a single “property market”. Opportunities abound among the various locations, price points and property types in every capital city and at every stage of the cycle.
It’s a matter of understanding your market of interest and unearthing the investment diamonds from among the real estate coal.
When you’re in the accumulation phase of your investing plan, your first step should be calculating how much capacity you have to borrow and what sort of rental you need to achieve in order to maintain the servicing of your debt.
Once you have these all-important numbers under your belt, the next is researching across the myriad of property markets on offer to see what location, price point and property type will best suit your needs and offer opportunity for long term gains.
People are human
Another aspect that demonstrates why attempting to ride the property market price curve to success is reckless is that even the most highly-informed property expert won’t be able to pinpoint the exact moment a market hits bottom.
Forget about tracing the statistics.
There were a few high-profile commentators calling the end of Sydney’s stellar capital gains as far back as 2016. While things have certainly softened in 2018, anybody who had listened missed out on over a year’s worth of equity upside.
Even in our current Sydney and Melbourne markets, there remains plenty of investor-worthy holdings waiting to tempt those with a long-term plan – and you’ll probably find a little less buyer competition around the place at present too.
Cost of inaction is great
The true loss from ‘bad timing’ is really just the cost of inaction.
I’ve rarely met a successful investor who wishes they hadn’t bought sooner.
The best time to buy is when you are ready, willing and able to secure a holding that will service the needs of your portfolio as part of your grand strategy.
If fear of markets is driving your decision not to invest, try calling our highly experienced buyer’s agent so they can reveal the opportunities sitting right under your nose in today’s real estate market.