Timing the market or time in the market?

Updated: Sep 10

Buy low, sell high. Its easier said than done!

You will have come across this saying before. It is widely used in many contexts across the real estate space & can be interpret in many ways. For me, I like to dig deeper and provide more context to its meaning. Holding the right property for the long term is a proven wealth creation strategy, period. Indeed, “the right property” is another conversation entirely. However, assuming you acquire/hold a strong performing asset, capital growth will naturally rise over the long term which is a good thing for the Sky Rocket. Pretty straight forward, but is now really your best time to divest? Of course, nobody can consistently predict the highs or lows, but at the time of writing it is clearly obvious we are experiencing explosive capital growth increases. All the analytics are pointing towards rises in excess of 15% in 2021 and in my opinion, year to date has already surpassed such number. But let’s be honest, seldom do any property markets travel with such velocity for extended periods of time. In brief conclusion, it is reasonable to consider, divestment/cash out shall, in the short term, be a sound business decision for some investors. Equally for others, now affords an amazing opportunity to scale a portfolio and acquire another “right” property! This double standard raises a prominent question, is now a good time to buy or sell?

The answer absolutely depends on investor profile and not timing the market singular. Sure, the climate forms part consideration, but in my opinion, strategy takes precedence here. For example, property owners (either PPR or Investors) will have recently enjoyed accumulated equity and improved serviceability to qualify for another loan. Not to mention a macro increase in “Covid savings” across many households. Many such demographic would not have qualified for lending this time last year. Currently, the lending space is as fluid I have seen for several years, being a leading driver of rapid appreciation in the first place. As appetite increases (both consumerism & lending), so do values. Therefore, fresh consideration can now be applied for some wishing to scale a portfolio. That is even despite an elevated entry point compared to 6-12 months ago.

My point here, now is an opportunity to grow a strong asset base. Unless your strategy is very short term, for example flipping properties for immediate profit, now is a fabulous time to enter the market and leverage your improved position. Please note, be sure the market will slow at some point in the short term! Therefore, forensic due diligence is critical and ensure to allow additional buffers and contingencies to get through the predictable winter ahead. Once spring comes along, you will enjoy maximum portfolio leverage across the next rapid growth cycle, affording the opportunity to repeat or eventually cash out.

This raises the other side of the debate:

At some point most investors will divest out their real estate holdings, and from my observations, now could be a wonderful opportunity for those nearing maturation point in their investment journey. With careful consideration and the right sale strategy, now is likely a tremendous time to exit as close to peak market as possible. Buyer demand largely outstrips supply, meaning more buyers than available properties and thus forcing appreciation and larger than expected results. This is how price growth occurs, but buyers beware. Do not live in the past! Once this dynamic levels out, market growth will relax and enter a “new normal” phase of the cycle. This does not usually mean retraction, but if this does occur, most of us will not physically be able to transact due to serviceability restraints at such time.

My purpose in business in the inspire development and empower change to provide real estate opportunities that make a lasting difference. Property does play an important role in all our lives, a specific function that, if you choose wisely, can be leveraged over time to make a real difference.

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