Has the property market bottomed? That’s the wrong question

During the last week I’ve had a number of questions from the media and even more from clients asking me what’s going on in property and how much further will property values fall.

I guess this is because the latest figures came out showing that median house price are flat in some parts of Australia and still falling in others.

So I thought I’d give you my take on it, and I’m sure not everyone will agree with me.

That’s OK, because I love sparking debate and getting people thinking about what I’m saying. 

How do you know what’s really going on?

The problem is, most people just take the information that the media spoon-feeds them as truth, and they miss out on opportunities because they don’t really understand what’s going on.

I want to give you one of the most important insights that I ever gained as an investor, because it opened up a whole new world of opportunity for me.

Currently there’s a lot of debate about whether the real estate market has “hit the bottom”. Is property just too unaffordable? Are prices going down more? Is the worst behind us? Are they going back up? 

This kind of debate sells lots of newspapers, but the reality is that sophisticated investors don’t care whether the market has bottomed out yet. It doesn’t matter.
Here’s why:

A very, different, but critical insight

The moment you leave your success or failure up to what direction the market goes, you’re in trouble.

Buying any kind of asset because you’re trying to “time the market” and hoping it goes up puts you in serious jeopardy. 

You have no control over your returns, and you’re making one of the most common mistakes I see investors make –speculating rather than investing.

Timing the market is what unsuccessful investors do.

Here’s what smart investors do to create long-term wealth:

First, they become educated in a specific asset or investment strategy. They read, they learn, and they understand. They don’t just throw money into an investment on a “hot tip” or because everyone else is doing it.

Second, they choose an investment strategy that suits the market. 

I can’t emphasise this enough.  This is why most investors fail – they choose the wrong strategy for the market they’re in.

I learned years ago that there is no such thing as the “perfect strategy”.  It doesn’t exist. There are always pros and cons. And most importantly is choosing your strategy based on your market.

It may interest you to know that over the last year I’ve sold three properties because of what I see happening to our property markets (yes, sometimes I do sell my properties), and I’ve committed my money to other properties instead.

If you’re waiting for the marketing to “hit the bottom”, you’ve missed the point.

The only way you’ll know the market has bottomed is in hindsight – and if you were trying to wait until the bottom, you’ll have missed it by the time you can tell when the bottom was.

So what should you do?

Instead of trying to do what is almost impossible (timing the market), the better strategy is to get educated and find out what truly is working in today’s markets.

I’ve found that timing is one of the most misunderstood concepts with regard to investing. The truth is successful investors know how to create wealth at any point in a cycle.

Of course timing matters – you don’t want to buy a property at the peak of the property boom, just to wait three or four years before its value starts to rise again.

But successful investors find that timing isn’t really that important.

Have you noticed how some investors seem to do well in good times and do even better in bad times?

Market timing isn’t really important to them. On the other hand, others do poorly in good times and even worse in bad times. Market timing seems to have very little effect on them either.

Interesting, isn’t it?

Another important point is that there are multiple property markets.

I just looked up the latest statistics and found that over the last year there were a number of suburbs in most states where the median price increased by more than 20% (yes, over the last 12 months). And there were other suburbs where the median price fell by more than 20%. 

I’m not necessarily suggesting you buy in these suburbs – in fact there are one or two I would definitely avoid.

But what I’m saying is that while some investors are getting in the game and taking advantage of some of the best buying conditions property investors have experienced in a long, long time, others are waiting for the timing to be perfect.

How will I know when the timing is right?

It wasn’t that long ago that I spoke with John, who had been waiting for over 10 years for the timing to be “just right” to start investing in property.

The timing will never be “just right”. There will always be challenges, situations, circumstances, obstacles, fears, doubts and things that you are going to have to overcome. The timing is never going to be perfect.

Ten years ago John saw some obstacles and didn’t get into property investment. If he had, chances are that wherever he bought his property it would have doubled in value by now, even if he had made a mistake and paid a little bit too much or bought in the wrong street.

It’s a fact that wealth is attracted to people who are decisive and committed. If you are waiting for the timing to be perfect, the timing will never be perfect to you.

A window of opportunity?

Currently property investors are being offered a unique window of opportunity, a buyer’s market unlike anything they have seen for a long time.

Sure there are economic challenges out there, but testing times create great opportunities.

The list is long of wealthy Australian property investors who sowed the seeds of their portfolio in the early ‘90s property slump, or the property slump of the early 2000’s with “remarkably poor timing.” These successful investors were busy doing while others were pondering.

Yes, we’re going though a property slump and a major change in the economic landscape.

While the timing might seem unfavourable to some property investors right now, others are going to do very well over the next few years. That’s the way it always has been.

Michael Yardney is the director of Metropole Property Investment Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. For more information about Michael visit www.metropole.com.au and www.PropertyUpdate.com.au.

 

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