08 Apr Property Cycle – Is timing really so important?
In today’s show Michael Yardney, from Metropole, tells us if it’s too late to get into this property cycle. He says timing is one of the most misunderstood concepts in property investing.
Kevin: We’ve spoken from time to time about property cycles. Is it too late to get into this property cycle?
Michael Yardney from Metropole Property Strategists answers that question. Hi, Michael.
Michael: Hello, Kevin.
Kevin: Is it too late, Michael?
Michael: Well, our property markets have performed very strongly over the last few years. But they’ve slowed down a bit now, so it’s got many investors wondering – you’re right – “Is it too late? Have I missed the boat?”
I understand why they’re thinking that. It’s probably because it’s often said that timing is everything when you invest in property. But, Kevin, in my mind, timing is one of the most misunderstood concepts regarding property investment.
Kevin: In what way, Michael?
Michael: The truth is successful investors know how to create wealth at any point in the cycle. Timing definitely matters. Of course, you don’t want to buy a property right near the peak of the boom and just have to wait a few years for the property market to rise. But successful investors find timing really isn’t important to them.
Michael: Have you noticed, Kevin, how some investors do well in good times and do even better in bad times? Market timing just doesn’t seem important to them. On the other hand, there are some investors who do poorly in good times and even worse in bad times. Market timing doesn’t have much effect on them, either. Interesting, isn’t it?
Kevin: Yes, it is, mate. What is it that differentiates that small group of successful investors from the crowd?
Michael: The fact that successful investors manage to make money while unsuccessful investors lose money at the same stage in the cycle, in my mind, means it’s not necessarily the external world that determines whether you make or lose money; it’s something inside of us.
I know many people would argue that that probably means it’s knowledge. But I don’t think that’s actually quite right, Kevin. There’s always a level of knowledge that you need – financial fluency that the average, investor lacks – but it’s much more than knowledge that makes successful investors. In my mind, it’s actually mindset, Kevin.
Kevin: What do you mean by that, Michael?
Michael: For some people, the current stage of the property cycle, Kevin, still makes really good opportunities around. Savvy investors see the current times as an opportunity to buy good investments.
But for others, there seems to be all sorts of negatives in the press, and they get confused and concerned by that, and they see it as the worst of times. Sometimes it’s because they are saddled with unfortunate debt or they’ve made wrong investments. But, in my mind, some people always seem to see abundance, while others seem to find scarcity.
Kevin: Yes. Is it more than just knowledge and facts, Michael?
Michael: I think you’re right, Kevin. That’s right. Knowledge alone won’t assure you success. I’ve seen some very knowledgeable people make some foolish investment decisions.
Interestingly, as I said, while some investors are currently getting in the game and buying great investment properties to secure their financial future, others at the moment are just a little bit tied up with all the what’s happening in politics and the world with the Australian dollar falling. “Is it too late in the cycle?”
A couple of days ago, I spoke to a client, and interestingly, Kevin, he’s been waiting ten years for the market to be right – just right. He’s looking for everything to line up. If only he’d bought any property then, boy, would he be in a different position today.
Kevin: I quite often wonder whether sometimes we just wait for the perfect time to arrive, Michael, and it just doesn’t happen.
Michael: Exactly. In my mind, wealth is attracted to people who are decisive and committed. If you’re waiting for the timing to be perfect, Kevin, the timing will never really be perfect for you. Currently, property investors are taking advantage of some good opportunities to buy properties, despite the heat in the market. I bet you when you interview them in a couple of years’ time on Real Estate Talk, they’re going to look back and say, “Hey. 2015 was a pretty good time to buy property.”
Kevin: Getting back to my original question, Michael, it’s not too late to get into this property cycle?
Michael: No, it’s not. But clearly, the market is going to be flatter this year. The market is not going to do the heavy lifting, pushing up the property values, so correct property selection in the areas that are going to outperform the averages. You’re actually not buying the market; you’re buying individual properties in the market – ones that will increase in value because of the location, because of the demographics in the area, and probably one that you can add some value to, Kevin, so that you’ll manufacture some capital growth while the market is a bit flatter.
Kevin: Sounds good, Michael. Thank you so much for your time.
Michael Yardney from Metropole Property Strategists. Thanks, mate.
Michael: My pleasure, Kevin.