Many people may be currently considering purchasing an investment property for the first time or looking to get back into the market. But a common question asked is if now is a good time to invest in property? It is clear that the current housing market is continuing to gain momentum. Although, the uncertainty of the economy propelled by the mainstream media breeds fears for many prospective investors. So, is now a good time to invest in property, and what is the market likely to do moving forward? For all investors, it is an important question to consider as the current state of the property market may determine whether it is the right time to pull the trigger. In order to answer this question, the investor should consider the following first…
Education
Do you have the right education to understand the market? Understanding the property market and the economy can determine if the investor has the confidence to pull the trigger or wait for the right opportunity. This will inherently provide greater success for the investor as better educated decisions are made. It is important to immerse oneself in education around economics and property investing. A lack of education can lead to poor financial commitments which can sometimes be only fixed with a loss of money or time.
Before considering if now is the right time to purchase a property, an investor should consider if they have the knowledge to make sound financial commitments. Investors should be calculated and not fearful of their own investment decisions. A lack of education can lead to fear which can stem from a lack of understanding. Having a sound understanding of property investing will build an investor’s confidence and mitigate fear.
In addition, It is important to note, where your source of information is coming from and if it is reliable. Many so-called “experts” can use their professional judgment to give educated predictions on what might happen in the short term. However, it can be hard for an investor to distinguish between a true expert or a property spruiker. A successful investor takes all opinions with a grain of salt. Your actions should be reflective of an in-depth understanding built upon your own research and knowledge. So, build your education and be confident in your own decision-making.
What are your goals?
If you want to invest in property you need to identify what you want to achieve. Creating goals will highlight what you are trying to achieve. Regardless of what the market is doing, your goals should be at the forefront of your decision-making and will help identify what your steps are moving forward. Without goals, an investor doesn’t have clarity around what they are trying to achieve. There is no point in investing if you don’t know why you are investing. Creating goals will dictate the approach needed to achieve the outlined goal. Before considering a purchase, consider what the purchase will do for you and if it aligns with what you want to achieve.
What is your time frame?
By understanding your goals, you then need to determine your time frame. It is important to distinguish between what is meant by this. A time frame is not a set time for getting into the market. In fact, your investment purchases shouldn’t be time-dependent as it can lead to irrational purchases or a fear of missing out (FOMO). Rather, when discussing time frame we are referring to how long you have in order to achieve your goal. In order to determine whether now is the right time to invest, the investor should ask themselves how much time do I have to execute my plan? This may indicate how quickly the investor enters the market.
If the investor is looking at investing over the long term, then price movement in the short term shouldn’t be as influential in contrast to other investment approaches. Getting into the market as soon as possible isn’t necessary as the approach is focused on the longer term. This is not to say, sit on your hands and do nothing but instead be meticulous in your due diligence and ensure the asset purchased is right for you.
Timing the market
It is well known that the property market over time has booms and busts which can be best illustrated by property cycles. Therefore, the time when an investor buys an asset is crucial to the success of their investment. Knowing this, many investors aim to purchase assets that maximise value and are primed for growth. This is known as timing the market. As an investor, you want to purchase just as the market begins to build momentum in order to achieve the best return on investment.
But why is this relevant? because identifying if now is the right time to purchase property misses the point. If you asked any educated investor who has owned property for the long term, they would likely tell you: “yesterday was the best time to invest in property”. Therefore, the question should be reframed to “where should I purchase a property?”
In most economic environments, there will be a market that has short-term potential for growth. Notice, the term “short-term” is used intentionally. This is because timing the market relies on a short-term focus. Historical housing data suggests over time major metro cities perform quite similarly. In fact, over the long term metro cities demonstrate similar performance results. So why does it matter where you buy? Because to outperform the market in the long term you need to outperform the market in the short term. To do this, an investor will need to time their investments to beat the market average and achieve superior growth. With multiple markets come multiple opportunities, by following the principle of timing the market an investor can aim to deliver greater success than the norm.
The Verdict
The question at hand is too generic to give a sophisticated response, generic questions lead to generic answers. Instead, consider this, is the investor ready to purchase a property? Do they have the education, goals, and a time frame to achieve these goals? If so, they may then consider “where should I buy?” remembering there is more than one property market. Meaning there will always be an opportunity to find good investments. It is the investor’s responsibility to find the right market for their investing approach. Over time there have been booms and busts but educated investors have been able to work towards their goals despite the market conditions. Therefore, to successfully invest in property you need to educate, be clear, and calculated.
