How do we accurately time the property market to buy a property at the bottom of the cycle and sell at the peak? That is the million dollar question... literally.
If I could tell you this with complete certainty, then I'd have discovered the elixir of property investment. The truth is nobody has a crystal ball. But just like an actuary, who helps set life insurance premiums, can predict a person's mortality with some accuracy - based on their age, diet, lifestyle and a range of factors that suggest when they might die, the same principle applies to property investing. Let me explain...
We can 'predict' with some accuracy when the best time is to buy and the best time is to sell using vast troves of property market data and clever algorithms that interpret this data. It is completely possible.
TIMING the market refers to buying at the best time possible to achieve your goals, i.e. buy low and sell high ... or indeed sell just before the market cycle turns downward - and it ALWAYS does.
TIME IN the market refers to the old adage that property will always go up in price over time, so buy-and-hold and forget about it. This is okay if you don't have the tools to monitor the market and adhere to the buy-sell signals that are far more apparent nowadays with technology like Boomscore.
Time IN the market is the PASSIVE investor’s mantra. Whereas, TIMING the market is the ACTIVE investor’s mantra. If you see yourself becoming a seasoned property investor, then read on. This is important.
It is completely possible to time the property market.
Sure, it’s better to be IN the market than not at all. That is obvious.
The old saying goes, "the best time to have bought was ten years ago".
But most property markets do nothing for 80% of the time and then suddenly there is a major capital growth upswing at the tail end of the cycle. Look at the mid-pandemic property market. Did anyone see this rapid rise in prices almost everywhere?
The big-dog investors knew where the prices were likely to go up the most.
Look at Sydney in 2013-2015. Not much growth for nearly a decade… then BOOM!
These days, data technology and data analysis has made it possible to reliably target micro-markets at the suburb level… as each suburb has its own cycle independent of the overall, larger (country or state-wide) property market cycle.
But inexperienced property investors are still swayed by so-called 'expert' opinion in the media and blanket statements about the Australian or State-specific property markets... instead of drilling down into what is actually happening on a SUBURB and even STREET level. And you can do this if you know how to find and interpret the property market data.
There isn’t just one homogenous property market … but 30,000 micro-markets. That’s roughly 15,000 suburbs further split into Unit and Housing Markets...each with their own unique supply and demand forces.
Essentially this means that there is always somewhere good to invest, you just need to know how to analyse the stats to find these gold mines. And once you find these about-to-boom locations, you can invest, wait for the market to rise, and then sell to recycle your equity gains (while factoring in your buying and selling costs) into potential boom suburbs.
And that friends, in simplistic terms, is how you build wealth through property, with minimal time and effort.
"But how do I find these growth suburbs before they happen?" I hear you thinking. "And then how can I possibly time the property market to maximise my returns?"
It’s a MYTH that it isn’t possible to time the property market… let’s bust that myth right now with an example:
Say you have two suburbs: Suburb A and Suburb B - both with a Boomscore of 55/100.
This would imply they stack up equally on all 8 supply-demand stats and are both in high demand relative to supply. A closer look at the trends could reveal something very different happening for both suburbs.
One could be sliding into massive oversupply while the other has buyers queueing around the block to inspect.
The importance of trends in property data
The trends in the data could be indicative of a suburb beginning to turn… or, indeed, burn… so what’s really happening?
SUBURB A
SUBURB B
Both suburbs have a Boomscore of 55/100 TODAY, or similar capital growth potential, but are trending in different directions
Let’s take a look
When you look at the trends in the data, you can see that Suburb A is trending upwards (demand is growing faster relative to supply) whereas Suburb B is trending downwards into potential oblivion.
Suburb A started off over-supplied but, for some reason, it appears that the demand for property is overtaking the available supply. Perhaps there is more interest from buyers moving to the area (demand). Perhaps developers have moved their focus elsewhere due to the initial oversupply which is now being absorbed by the market?
If you followed the demise of some of the mining towns like Moranbah in recent years, we noticed that the data snapshot for Moranbah was pretty good when everyone was still investing... but... trending downwards… steeply… Just like Suburb B above.
Yet, a Boomscore of 55/100 is okay (balanced market) but clearly it was coming off a very tight (high demand, low supply) market that was about to turnaround unfavourably.
At that point, it could be time to sell.
This is called timing the market... as this downward trend could be leading into oversupply fast despite the once booming Suburb B.
So a suburb with a high Boomscore is great. But if the Boomscore is trending downwards then it’s time to ask some very serious questions. And if it’s trending upwards, then now is the time to act provided you’ve discovered the trend in time and the local market fundamentals are accurately reflected in the stats.
If you already own investment properties and want to avoid being the last to sell when the property market cycle turns, then monitor the data charts for your suburbs in our property research tool, Boomscore MARKET ALERTS. You can set your alerts so you don’t miss a warning. It’s that simple.
Give it a go.
Blog Post by Michael Fuller