TIME IN the market v TIMING the market (Ep.19)

Should you use the crystal ball to determine where we sit in the economic and market cycle OR 

Should you purchase a quality property when it suits your own personal economy? 

In episode 19, we dissect “TIME IN the market v TIMING the market” and the evidence is very clear, the odds are stacked heavily in one direction. Which is it and why? 

Take a listen as the Property Professor takes you through his analysis across each capital city over an extended period of time, and the team dissect it with a fine-tooth comb! 

So, grab your vanilla slice and fruit mince pies (as Peter did before the episode), sit back and relax as David Johnston, Cate Bakos and Peter Koulizos break down the data, expose the upside, risks and poor outcomes on this age-old topic! 

Resources

• Hold or fold: why smart home owners should keep a cool head when the property market starts to dip 
• When to hold and when to fold!(Ep.18) 
• Time in or timing the market
• Why short-term investing has long-term consequences 
• How our mortgage strategy helps us to hold properties 
• Mortgage Strategy 101 – Ep 3. Holding Property 
• Five mortgage strategies that can grow your wealth 
• Why your approach and assessment of risk is paramount to property success! (Ep.10) 
• The critical mistakes of property investment – starting without a plan 
• More data reinforcing the weak returns of new apartments – something we have been banging on about for almost two decades 
• Why the land-to-asset ratio of a property can determine its future price growth 
• How data can help property investors identify gentrification before it happens 
• Property Cycle Management – why now is always the best time to buy if it suits your personal economy and you have a long-term property plan (Ep. 12) 
• Why your Mortgage Strategy is more important than your interest rate! (Ep. 9 ) 
• Choosing whether to hold or sell investment property 
• Questions to ask when buying an investment property 
• High rise towers – yet another reason to stay away 
• How to succeed with Property and Create your Ideal Lifestyle 
• Mortgage Strategy 101 – YouTube video series. 

Show notes

• The big question – are you better off buying and holding or chasing the market trends and picking the next hot spot, then selling every few years? 
• Luckily we have some data that can help us answer that question, thanks to the Property Professor, who conducted a study of each capital city – would you have been better off to buy and hold for 15 years, or better off to purchase and sell every 5 years? 
• Let’s go through the best performing cities to the worst performing – keep in mind that if a property grows by 100%, it has doubled in price! If you purchased a house for $400,000 in 2003, here’s what would have happened if you held for 15 years.  
  • Melbourne property values grew by $147% – your asset would now be worth $988,000 
  • Hobart property values grew by 122% – your asset would now be worth $888,000 
  • Darwin property values grew by 118% – your asset would now be worth $872,000 
  • Perth property values grew by 106% – your asset would now be worth $824,000 
  • Adelaide property values grew by 94% – your asset would now be worth $776,000 
  • Canberra property values grew by 88%  – your asset would now be worth $752,000
  • Sydney property values grew by 85% – your asset would now be worth $740,000 
  • Brisbane property values grew by 81%– your asset would now be worth $724,000 
• You can make some good money by purchasing and doing nothing – get on with your life! 
• So, what if you had chased the next hotspot and bought and sold every 5 years? If you got things 100% right and purchased in Darwin in 2003, Sydney in 2008 and Hobart in 2013 – you would have ended up with $786,000. Remember, this is the best-case scenario. Hang on, how can this be? 
• Fees! The transactional costs of getting in and out of property is the killer of wealth. Each time you purchase a property, stamp duty and other government charges eat into your wealth. Then on the way out, the real estate agents take their cut on top of the Capital Gains Tax you need to pay.  
• And we are just talking about the cold hard cash in your pocket – but how do you value your time? Prepping a house for sale and searching for the next purchase. How many hours would this take and what is the cost?  
• What if you didn’t get it right? The consequences of making a mistake along the way could be devastating. The more decisions you make, the more risk you have of making a mistake, it’s that simple. 
• Hot shoe shufflers, please take a seat and relax. We commonly see people who are itching if they are not making an investment decision, thinking “I must be doing something, I need to be taking action”.  If that’s you, take another look at the numbers. You can end up very wealthy if you do nothing but pay down your debt and save (plus you’ll probably live longer from less stress). 
• Not to mention, those numbers are based on the average growth figures, so if you select carefully, a property that will outperform, you’ll be miles ahead of the pack.  
• Risk management – create a plan that will enable you to hold the property, even in difficult times.  
• Don’t buy property willy nilly – how much time have you spent thinking and planning for your next purchase? Is it more than you spent looking for your last car? It should be! 
• If you like the thrill of chasing the ace, there are better forms of investment – shares! There is no stamp duty and no huge commission.  
• However, it’s easier to pick a winner in the property game, than the share market. The asset is more stable, the location does not change, the dwelling is hard to change. Shares are more susceptible to human behaviours and a changing landscape.  
• Property values stay between +10% and -10%, with shares having a much larger swing in both directions.  
• Retirement – really you only need 2-5 properties to set yourself up. And don’t forget about diversifying, you should have a mixture of savings, super and paying down debt.  
• Paralysis by analysis – not making a decision because you are trying to time the market. You need amazing skills to be able to predict what will happen.  
• If you are waiting for the property market to hit its trough, the trough may still be higher than where it was before you were ready to buy. Plus in 20 years, what does it matter that you paid an extra $100,000? Retraction is usual shorter than growth, the uptrend generally goes for longer, particularly in our capital cities.  
• If you’re going to sell, make sure you buy immediately. Do not dawdle, if you have lost your footing on the property ladder, prices may run away from you.  
• “Be fearful when others are greedy and greedy when others are fearful” – purchasing in a falling market.  
• Alarm bells – when a client suggests that their approach is market cycles.  
• Calling all marketers! If you love marketing and would like to help us market the podcast, we’d love your help.

Gold Nuggets

Cate Bakos – The Property Buyer’s Golden nugget: If you’re capitalising on a depressed market and banking on it improving, understand the recovery driver.  What is it? If you can’t be confident that there is a proven driver that will bring it back on to the boil, you are taking a great risk.

Peter Koulizos – The Property Professor’s Golden nugget: Do your research at the beginning, take investment advice, pick the right street, in the right suburb, in the right city.  And just buy and hold. Even if you don’t get it perfect, buy and hold shows you will make more money, than trying to time the market.

David Johnston – The Property Planner’s Top Quotes: 

“Absent a lot of surprises, investment are relatively predictable over 20 years, you may as well flip a coin to decide” – Peter Lynch. 

“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go” – Benjamin Graham. 

“Our favourite holding period is forever” – Warren Buffett.