Property adviser Richard Sheppard firmly believes that with good research, you can benefit by being selective in your timing.
Timing the market generally refers to the process of buying at the bottom of the market cycle and selling at the top. However, as property buying and selling costs such as stamp duty, agent commissions and capital gains tax are quite high, it is usually far better to focus on buying in the right location, as soon as you have the equity and borrowing capacity to do so. It’s normally better done this way as there is almost always a market value increase rather than a drop. This essentially also means there is almost never a good time to wait, but always a good time to act sensibly if you have the equity and borrowing capacity to invest further.
In Australia, in the past 80 years, there has always been one or more property markets growing well (some much more than others). So why would you choose to wait for your local market to drop instead of doing some research and sourcing advice to discover the areas likely to grow at a steady pace?
Timing the property market is far easier than timing the share market. It is a slower moving market, and the fundamentals of supply, demand, affordability, vacancy rates and yield are much more simple to understand, and information is easily obtainable though companies like the Australian Bureau of Statistics, Housing Institute of Australia, ANZ Economics, BIS Shrapnel and many more.
Did you know that in the past eight years, the Sydney property market has grown least of all the capital cities, with growth of about 17 per cent in total? That’s less than two per cent a year on average, while Canberra has had 41 per cent, Brisbane 42 per cent, Hobart 47 per cent, Melbourne 62 per cent, Adelaide 64 per cent, Perth 84 per cent and Darwin, the highest growth of all capitals, at 102 per cent. That effectively makes Darwin 85 per cent better than Sydney over the same period, which on a $500,000 property is $425,000 more growth and equity.
While it’s easy to comment in hindsight, there was, in fact, good research available at the time that indicated similar rankings between the states. Even if the research was only able to help you pick a city 10 per cent better in growth, on a $500,000 property that equates to $50,000 more growth. That is enough equity to buy another property in the next growth market, in addition to perhaps gaining the added benefit of minimising land tax and increasing diversity. This can have a dramatic benefit over time, so it is well worth investing in some good research and advice to achieve maximum return.
This article was originally created by Richard Sheppard for Peninsula Living magazine.