Boom or bust, where to buy in the property cycle

Warren Buffet is famous for advising investors to buy at the bottom of the market and sell at the peak in the property cycle.   Derr – seems simple, doesn’t it?

The thing is: how do you know when the market has stopped falling (i.e.: the “bottom”) or ceased to climb (i.e: the “top”)? And another thing: how do you find the necessary bravery to move against the tide and be the one of the few people prepared to do the opposite of everybody else?

Many property investors (and first home buyers in particular) are concerned that if they don’t buy now – in a rising market – that they will miss the boat. And in many instances this will be the case.

I can tell you that those buyers who were brave enough to buy in 2012 won’t be worrying about whether they should or should not buy now. They will be busy paying off the loan on a property that has probably already grown in value more than 20% (if they bought in Sydney).

So, to all the panicking buyers out there now, I ask this question: “what on earth were you doing in 2012?” Why don’t people want to stick their neck out and buy when conditions are actually in their favour? It’s a mystery I don’t think I will ever solve.

If we learn our lessons well, we will try to take advantage of the next buyers market. But the last one is now ancient history. If you are waiting for the inner–Sydney market to return to pre-boom levels you may be waiting forever.  In my experience, the property market within 10kms of the CBD never falls to a significant degree, rather the growth rate just slows to a trickle. The caveat here is that quality property won’t suddenly drop in value, but a lemon will, so be careful what you buy.

At the other end of the spectrum is the property owner who wants to pick the best time to sell. The person that decides to sell in order to reap the big capital gains they have made over their period of ownership, particularly the past two years. Go for it – as long as you have a good reason for selling and a plan for the money. But if you are bailing out in order to rent and buy again once the market falls, then my advice is to be very careful.

There are areas where the peaks and troughs of property prices are precipitous (think sea change) – in these cases it would be a great idea to sell at the peak and put your money in a safer market. But the areas in which we operate (inner Sydney), this could well be folly as you would be taking money out of a rising market and you may not be able to get back in at the same level.

Further reading:

Time Is Money In Real Estate when buying property

Does a slowing market mean time to buy?

What property drops the most value in a buyers market?



Please note:

Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.


Free e-book for Owner Occupiers

7 Steps To Buy Your Dream Home

Download Now

Free e-book for Investors

How to Choose a Low Risk Investment Property