It’s apparent from the front pages of metropolitan newspapers the time has arrived for the media to start “forecasting” real estate doom and gloom that’s set in for years to come.
In fact, if you believed the headlines of late, you’d likely want to hide under your bed until the property sky supposedly stopped falling.
Of course, property investment professionals know to look past such nonsense but unfortunately many buyers and sellers do not and will make bad decisions because of it.
They’re fearful because they’re giving credit to some media reports that, under scrutiny, are actually more make-believe than fact.
The truth of the matter is that there is nothing to fear from changing market conditions.
In reality, there is much to gain.
One of the greatest investors of our time, Warren Buffett, believes in a philosophy of buying when others are fearful.
Now, that doesn’t mean he waits for the wider population to be shaking in their boots because of a sense of financial unease.
What it means is he invests counter-cyclically when competition is low, but the upside potential is high – a sound strategy for both shares and real estate as it turns out.
Successful investment involves securing property that ticks all of the fundamentals, but it is also about buying for the correct market price.
Now, that doesn’t mean buying property cheaply – that is never a good idea if it is an inferior property or one that is in a substandard location.
It means buying when there are fewer competitors to drive up the price and analyzing the data and demographics of the location to achieve the best outcome.
Savvy investors, of course, work with professionals to ensure they buy the best property in the best location for the right price, using the right data.
However, another benefit to using professionals, is that it helps to keep emotion – that is, your emotion – out of the equation.
And that is vitally important because it is human nature and human emotion that drives up prices.
How to make the most of the market
Firstly, there is no one market.
In fact, Australia is a land of many markets – both city and major regional – which are doing different things at the same time.
Just look at Sydney, for example, which many commentators seem to want us to believe is the only market in the nation.
While we know it is currently transitioning to the stabilisation phase of its price cycle – which provides opportunities for long-term investors – many pundits are trying to convince the masses that this is in some way unusual.
It is not.
All markets go through cycles that feature periods of slow and strong conditions with flat spots in-between.
The thing is, while Sydney’s market was slowing down, Melbourne’s was strengthening for a time, and so was Hobart’s in quite a major way.
On the other hand, Brisbane and Adelaide remained relatively steady, and Perth and Darwin were going backwards.
Remember, this was all happening at the same point in time.
Smart investors and their teams, of course, have undertaken significant research and they know when to enter a market – before anyone else – and when to move on to the next location – again, before anyone else.
That way, they’re able to secure solid properties for good prices before everyone else jumps on to “the next big thing”.
At the end of the day, successful property investment shouldn’t involve moments of emotional highs and lows.
A cool head should always prevail – regardless of what the media believes the market is doing.
That way, canny investors can make the most of soft market conditions, while the majority of buyers stay on the sidelines waiting for everyone else to do something before they jump on the bandwagon.
Review the PIPA (Property Investment Professionals of Australia) Chairman Peter Kouilizos presenting an Australian Property Market Update in Feb 19.
“Thankfully interest rates and unemployment are at historical lows, so there is no property crash on the horizon. This is a great time to buy if you have access to funds.”