The Perth property market currently has become very active and has continued to increase in value. This is mainly because there is a limited selection of good properties on the market. This is due to a rise in population brought about by families returning from interstate and overseas to enjoy the safety of Perth and all the surrounding suburbs.
During the period from 2017 through to November 2019, records show the Perth market fell over 12.5% and more in some suburbs. Almost a greater fall than any other state in Australia. To gain profit in investments, investors always keep in mind that they need to be able to buy low and sell high. It seems like a simple strategy that is easy to follow, isn’t it? However, knowing when the market has reached its lowest point or highest point isn’t easy, even for experts. Prices change rapidly depending on the demand and economic conditions.
This is what we are seeing now in the Perth Real Estate Market. Prices are starting to rise, and astute investors are seeing that this is the time to take advantage as the real estate market changes direction. Some independent market commentators have predicted a rise of up to 20% in some areas while some of the major banks are a little more conservative in forecasting up to a 10% rise in values.
When it comes to investing in real estate, what is the best strategy – timing the market or time in the market? These terms may sound similar but they are totally different concepts.
Timing the Market
Timing the market means being prepared and acting quickly, but wisely and seeking advice from experienced experts in the real estate industry. Experienced buyer’s agents monitor the market daily and select properties with potential, often before they come onto the market. This means you’re getting the first opportunity before the rest of the buying public.
There are many factors that lead to the rise and fall of market prices mostly socio-economic factors, government policies, demographics, and technology.
For real estate, timing the market is difficult to predict even for seasoned experts. And even if you were able to buy low, there is a chance that it could still take you years to profit from your investment.
Time in the Market
Time is one of the best assets an investor could have. However, not all investors know how to properly use it to make their investment more successful. Property prices fluctuate from time to time and the demand also changes depending on the economic situation. With this, when there are slight changes in real estate prices, some investors tend to sell their property sooner than others as they do not want to risk the possible plummet in prices which can eventually lead them to lose their profit.
However, in the long run, property values tend to rise. Given this, investors who spend more time in the market have more probability of getting a higher return than those who invest by timing the market. If you are planning for a long-term investment, time in the market is more important than timing the market.
Timing the Market vs. Time in the Market
Consider these two factors when buying a property. For people buying a home for themselves, time in the market might have less impact on you in the long run. However, for property investors who wish to buy and sell properties, it might greatly affect your profits.
To simply put it, timing the market means predicting when is the right time to buy and sell in the real estate market while time in the market is taking a longer time before you sell the property. Both have their pros and cons. In timing the market, it is hard to predict whether or not it is the right time to buy or sell as prices change rapidly. But if you are lucky enough to buy or sell at the right time, you can gain profit in a shorter period. On the other hand, if you wait for a longer time, you might still need to pay maintenance fees for your property which can eventually offset the amount of your profit. However, since property values tend to increase over time, you have a higher chance of becoming successful.
In the end, it depends on your objective as an investor and the level of risk you are willing to take.