09 Mar 2018

Timing the Market or Time in the Market?

Property investment is still at a high point in Australia right now, and more and more people from all walks of life are striving to commit to an investment strategy to generate future wealth. However, with house prices having skyrocketed in the last five years, a major point of confusion amongst investors is whether timing the market or time in the market is more important to increase wealth generation.

Despite a whopping growth in property value in the last few years, with Sydney in particular experiencing up to 50% growth since 2013, investors rest assured that you haven’t necessarily “missed the boat.”  The key when investing in property is to look at the bigger picture – and the bigger picture involves a much longer investment cycle than a few years in a booming market.

Timing The Market

Fluctuations in property values occur in cycles and there’s no denying that when you get the timing right, you can fast-track your profits. Alternatively, if you get the timing wrong, your financial return can be heavily delayed.

Timing the market effectively can mean that you benefit from two growth cycles rather than just one, creating a completely different outcome as the years go by. However, the timing is never going to be perfect so waiting for that ‘perfect timing’ can simply mean wasted opportunities. It is true that those investing in property now will have to wait far longer for their property to experience oversized growth than buyers a few years ago, however this should not deter wannabe investors.

Time In The Market

It’s true that time in the market is the most crucial factor when considering purchasing investment property. Long-term plans must be front of mind when investing and if this is the case, the performance of your property over the first few years should be irrelevant in comparison to the eventual financial gains you will make.

So what is considered a “long term” investment? A minimum of 10 years is generally a good rule of thumb, with the hope that you would experience two significant growth periods during that time.

The key take home message is that for those serious about building a profitable property portfolio, focus on your end goal and remove any fixations on perfectly timing the market. Acknowledge where you are now and where you want to be in the future. Utilise your knowledge and assets wisely to get there, whether on your own or with the help of a mortgage broker and/or buyer’s agent. That is ultimately the difference between genuine and lasting investment wealth, and those hoping to earn a quick buck through property.

This article was contributed by REBAA affiliate member https://rebaa.com.au/members/1st-street-financial/