- September 28, 2020 at 7:58 am #26125
Recently I have been thinking about this Covid situation and how it affects property investment. I have always been of the belief that property purchases should not be timed too much—what matters is how long you spend in the market. However, given this huge uncertainty, is this the first time in property investment landscape in Australia that purchasing an investment property should be timed or better yet postponed?
What are your thoughts..
- September 28, 2020 at 12:32 pm #26128Jacob SinghParticipant
I always refer back to the last known crisis when I get asked questions like this one.
Shortly after (and even during) 2008 GFC quite a few suburbs continued to exhibit double digit capital growth despite the general doom and gloom predictions in the media. Those investors who ‘ignored the noise’ and did their own research into the property market managed to secure some of the best property deals of their lifetime and rode the the wave all the way to the east coast peaks of 2017-2018.
I’d say the current situation is similar to GFC with one caveat. GFC impacted all markets equally in a negative way, whereas COVID is ‘focused’ on some industries more than the others. Fore example tourism, hospitality, travel are in decline whilst food delivery, pharma and IT are on the rise. This needs to be taken into account when researching the markets in this environment.
To answer your question it is absolutely beneficial to time the market if you want to maximise your returns. However my definition of the market is probably different to yours. I always research the suburb market and not the markets that are commonly reported in the media. For example 0.4% decline of median values in Sydney means nothing to me, because within that -0.4% decline are hundreds of suburbs, some of which decline by -5% and others that rise by 4% averaging the total to -0.4%. You just need to find suburbs that have a good prognosis compared to the others and time your purchase based on that.
- September 29, 2020 at 9:08 pm #26135Kid RockParticipant
I agree with the concept that COVID-19 is impacting certain industries and not all however my worry is that COVID-19 will impact everyone’s thought process and that could potentially change the rationale used by individuals when purchasing a property.
I have a feeling we are moving into uncharted waters my friends and who knows what awaits on the other side 🙂
- September 30, 2020 at 1:12 pm #26149
Thank you… I must say i do agree although i feel that Covid is different to GFC because there is a larger cloud of fear and uncertainty with Covid. In any case, research is paramount and i do believe these times could potentially provide more opportunity…
What do you think – would a smart bet than be to go for the high value properties that have dropped due to the cirsis or for low value properties? Would considering the value of the property matter at all or are you juts a percentage kid of a person?
What I am saying is, since we both agree there could be opportunities now and that counter cyclical investing Is always a good strategy, should we in any case revise our strategy and move from looking at growth percentage to now focusing on the overall value of the property more so than the percentage envisioned for its growth? Looking at drops in value—we know the scale it has potential to grow to return back to its old value and this can be a safe bet strategy given the situation… What do you think?
- October 1, 2020 at 10:30 am #26174Iam TheStateParticipant
I think you guys are over-thinking this. High value properties are high value for a reason (market demand) so they are always a much safer bet. Unfortunately not all of us have millions of dollars so it comes down to finding affordable locations today that tick all the right boxes to turn into the next best place to live tomorrow.
There will always be markets to ‘play in” after you establish your personal threshold. For example if you only have 300K now (peanuts for a big city dweller like myself) you’re locked out of pretty much every major urban property market in Australia. But for the 300K there will be high and low value markets (relative to each other) you can still play in.
- October 1, 2020 at 11:29 am #26182
HI Iam TheState..
Thank you for the response. I don’t think however that you are considering my question in enough detail. Stating that there are many different markets is like saying that the sky is blue. We get that.
My question relates to focusing on discounting more than on forecasted growth. Assuming that the high value market has suffered, and assuming there is one that a person can afford, my perception is that having the ability and knowledge to find an area that has peaked considering its historical movements (this can be an area with 500k median value or an area with 1.5 mil median value) one would be able to find an area which median price has suffered more due to two interconnecting things: Covid impact and being at peak (or overvalued) previously. These areas would experience a bigger discount that other areas meaning that investing in them, not only will one take advantage of a bigger discount but will also be able to compound that with the forecasted growth when the area rebounds.
The strategy as such, for me at least, in these times would be more to find areas that have peaked a year ago and have as such suffered more than normal discount due to the current climate.
- October 2, 2020 at 10:29 am #26194Jacob SinghParticipant
You both make valid points.
iamthestate, like your practical approach.
menotyou, love the outside-of-the-box thinking.
menotyou, to summarise you’re suggesting to leverage property cycles to time purchases and applying the percentage drop in the most recent phase of the cycle to compare areas one to another. One question I have is – how do you know that the price drop will not continue? In other words how do you you know that a market is truly at the bottom?
- October 6, 2020 at 8:35 am #26269
Jacob Singh… You don’t need to know if the market is at the bottom. The key thing is to look at established areas that have performed extremely well in the past and have held their value. After you have established these, you look at the impact the current situation is having in terms of percentage drop. They key is to find a percentage drop that is irregular considering past movements of the area(s) in question. This way you find a ‘bargain’. One you have found a bargain you can look to time the purchase but in essence it does not matter when you purchase as long as you are looking to hold the property for a period of time until the drop realised is absorbed and the area returns back to its prior solid position. In this instance, the key is to spot a bargain and wait—timing the make tis irrelevant in this instance.
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