How important is timing in the property markets?

Our property markets have performed strongly for a few years, but now have slowed down a little leaving many investors wondering is it too late this time round.

They wonder if they’ve missed the boat this property cycle.

I understand why they they’re thinking this way.

It’s partly because it’s often said that timing is everything when investing, but I’ll let you in on a little secret – that’s not really the case.

I know when I first started investing I understood little about market cycles, yet I made some great investments.

Then I learned about the concept of…

Countercyclical investing

I was told that smart investors aim to acquire assets counter-cyclically in markets that have not experienced recent booms.

In other words the basis of counter-cyclical investing was to follow Warren Buffett’s advice:

Be fearful when others are greedy and be greedy when others are fearful.

My mentors taught me that understanding the recurring relationship between the different stages in the market cycle was critical to maximising the returns on my investment dollar, while at the same time exposing myself to minimum risk.

And it seemed to make sense – if you know where things are heading and buy before the crowd does, before prices start to rise strongly, you were likely to make big profits!

But over time I realised that that was not always the case.

I also realised that…

Timing is one of the most misunderstood concepts

The truth is successful investors know how to create wealth at any point in a cycle.

Timing definitely matters.

Of course, 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, it seems, isn’t really important to them.

On the other hand have you noticed 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?

So what differentiates successful investors from the crowd?

That at the same stage of the property cycle successful investors manage to make money while unsuccessful investors lose money suggests that’s it’s not our external world that determines whether we make or lose money, it’s something inside us.

Many would argue that it’s knowledge that differentiates these two classes of invetsors, but I don’t think that’s quite right.

Sure they may have a level of knowledge and financial fluency that the average investor lacks; yet knowledge alone doesn’t make them successful investors.

What allows some people to become super successful investors is their mindset -the way they think about money and wealth.

In his book, A Tale of Two Cities, Charles Dickens famously wrote:

“It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness.”

Amazingly things haven’t changed much since Dickens wrote that in 1859.

For some people the current stage of the property cycle makes these the best of times. For savvy investors the current times are an opportunity to buy top class property assets that will help them set up their financial independence in the future. These people see abundance.

For others, these are the worst of times.

Some only see the negatives in the media; property prices at record highs, banks are tightening the screws on property investors and lower or no capital growth is being predicted.

Others are saddled with investment debt secured against the wrong type of investment such as a property in one of the mining towns where values plummeted or regional centres where prices have remained stagnant.

These people don’t see the available opportunities, they don’t see abundance. They see scarcity and they feel fear.

You need more than knowledge

As I explained, knowledge alone won’t assure your success… I’ve seen some very knowledgeable people make some foolish investment decisions.

Interestingly, while some investors are still getting in the game at this stage of the property cycle and buying great investment properties to help secure their financial future, others are waiting for the timing to be perfect.

Only late last week I spoke with David, who had been waiting for close to 10 years for the timing to be ‘just right’ to start investing in property.

Of course, 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 David saw some obstacles and didn’t get into property investment.

If he did, chances are that if he bought a well-located capital city property it would have close to doubled in value by now, even if he had paid a little bit too much or bought at the wrong time of the cycle.

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.

Currently property investors are being given some great opportunities to buy properties as the markets have slowed a little from their frenetic pace of the last few years.

Personally, I’ve added substantially to my property portfolio over the last few months.

As I did last year and, interestingly, also the year before.

I’m not worried about timing or the property cycle

The list is long of wealthy Australian property investors who sowed the seeds of their portfolio with “remarkably poor timing”.

Like those who bought at the advanced stage of the last property cycle in 2010, or those who bought just before the GFC in 2007 and 2008; as well as those who invested in 2003-4 and it was much the same in the early 90’s.

These successful investors were busy doing while others were pondering.

Yes, we’re moving into the next stage of the property cycle and sure we’re seeing some major changes 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.

I’m certain ten years from now, there will be a group of successful property investors who will tell stories of buying properties when everyone advised them not to, when everything seemed difficult and when all the media was negative – right now.

Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property. Subscribe to his Property Update blog.