The debate about timing the market or time in the market is a persistent one that bugs every investor.
Whether investing in property or the stock market people want to know the best strategy on when to enter the market.
One of the most often asked questions we get from potential property investors is ‘when is the best time to get into the property market?’
People want to invest in a rising market. And this is understandable, to a certain extent.
One thing to keep in mind is that markets go through cycles. Like most things in life, there will be ups and downs. And there will be time for consolidation.
Is it good to heed Warren Buffett’s advice?
Warren Buffett, the legendary investor known as the Sage of Omaha, is known for his counter-cyclical view on investing. He is often quoted for this pithy: ‘be fearful when others are greedy and be greedy when others are fearful’.
For property investors this may mean sitting tight when others are chasing higher prices while being ready to pounce when prices are falling.
But is this always the case? Is the counter-cylical strategy the best when investing in the property market?
This chart shows the ups and downs in property prices for the major cities in Australia. Trying to pick the tops and bottoms of those moves would have been a challenging exercise.
Investing for the long term and buying quality property for investment is key
Considering that all markets go through cycles but no one knows certainly when one cycle ends and the other begins, trying to time the market could be tricky.
The fact is there are people who generated good returns even if they bought into a property at the low of a cycle. And there are some who didn’t do as well even if they bought at the top of the cycle.
Knowing this, time in the market makes more sense.
Here’s a few things to consider:
No one knows when one cycle ends and when the other starts. When the pandemic hit in 2020, many market observers predict that property prices will dive due to the restrictions and uncertainties.
But what we saw was the opposite. Property prices across Australia recorded some of the biggest gains over the past two years. From the major cities to regional areas, prices registered about 10-20% gains despite the lockdowns.
You don’t make money in property when you buy it, you make money when you sell it. If you look at it closely, it doesn’t matter much when you buy a property for investment. What matters most is when you sell it.
Even if you buy a property at the low of the cycle and hold onto it for several years until the market rises again, you can still generate good returns.
On the other hand, even if you buy at the top of the market thinking that markets will continue to rise, there’s always the possibility that it’s the peak of that cycle. And prices could fall from there.
Time in the market is more important than timing the market
Considering the market cycles, trends and patterns that we’ve seen over the years (or even decades) of property market growth in Australia, time in the market remains the best strategy for property investors.
Even professional property investors with multi-million dollar portfolios don’t try to time the market. They buy when they see good value, top quality properties with potential for growth.
Trying to predict and foresee the future can be a stumbling block as it can stop you from seeing a good opportunity right in front of your eyes because you’re looking too far ahead.
If you’re still in doubt on when is the best time to enter the property market, keep in mind that if you buy top quality investments that are bound to appreciate in the long-term, then you are into a good investment.
You can learn more about the key factors can boost the value of your property investment in this article.
If you would like to discuss the Australian property market in more detail, please reach out to the team to organise a time to have a conversation about how Wealthi can help you build a successful property portfolio.
Eva Diaz is a communications specialist with focus on the financial markets. Connect with Eva.