The dream of buying low and selling high has been the dream of real estate investors for generations.
Regardless of whether you are in Victoria, New South Wales or any other state the reality of timing the market is fraught with challenges and risks.
In this blog, we’ll explore why trying to predict the perfect moment to buy or sell can be a perilous strategy and why a more consistent, long-term approach might serve you better.
The Challenges of Timing the Property Market
Predicting the Perfect Moment
You need amazing skills to predict and time the market. Few possess the ability to accurately forecast market trends.
No one has a crystal ball:
- If you are selling, how can you know when the cycle has reached its peak?
- Once you sell, make sure you purchase immediately – do not dawdle.
- Losing your footing on the property ladder can lead to prices running away from you.
The Risks of Buying at the Right Time
- Falling prices are generally shorter than uptrends: Waiting for values to hit the trough might result in higher prices than when you were initially ready to buy.
- In the long run, small differences don’t matter: In 20 years, does it matter that you paid an extra $20,000 if your capital growth has been hundreds of thousands or even millions?
- Often the best strategy is to purchase and hold until retirement for many reasons.
By purchasing and holding, you minimize the risk of selling in a downturn or before prices have had a chance to increase and obtain some capital growth.
You also save significant sums in buying and selling costs.
Not to mention time and stress.
The Importance of Long-Term Property Planning
Planning for the Long Haul
- Avoiding the need to sell too soon: One of the most common regrets is needing to sell a property too soon due to short-term needs.
- Lack of forward planning leads to mistakes: Make sure the property you buy meets your long-term needs, not just your immediate ones.
Considerations for Long-Term Planning
- Have good conversations with your partner: Ensure you’re on the same page about your future needs.
- Think about your children’s needs at different ages: Plan for the future to avoid needing to upgrade.
The Hidden Costs of Frequently Buying and Selling Property in Australia
The Financial Toll
- Unnecessary costs add up if you buy three homes and sell two over your lifetime (approx depending on the value of the property):
- 3 sets of stamp duty – $120,000
- 2 sets of selling costs – $30,000
- 3 sets of bank set up – $3,000
- 3 sets of legal fees – $5,000
- Moving 3 times and associated costs – $10,000
Total costs: These can add up to $200,000 to $300,000 or about 10% of your lifetime earnings.
Do you really want to work 3-5 years only to cover the costs of buying and selling.
The Personal Toll
Time and stress: Consider the value of your time and the mental toll of selling and buying properties frequently.
Listen to the Property Trio podcast
For more in-depth insights on the perils of timing the market and planning for your next purchase, tune into the Property Trio Podcast, where numerous episodes are dedicated to these essential topics.
Ep #5: The lifestyle vs Investment conundrum
Ep #6: What determines your Property Strategy
Ep #19: TIME IN the market v TIMING the market
Ep #27: How many properties do you need to retire wealthy?
Ep #215: Property Puzzle: Piecing Together Your Next Purchase Strategy
Reach Out to Us for Expert Advice
Trying to time the real estate market is a gamble that can come with significant financial and personal costs.
Instead, consider a more reliable strategy of purchasing and holding properties for the long term by starting with a Property Plan from today through to retirement.
This approach not only minimises risk but also maximises your potential for capital growth.
For personalised advice on your real estate investments and to develop a long-term strategy that suits your needs, contact us today.
Let’s build your future, one wise investment at a time.
