Timing when to buy or sell property doesn't require stopwatch precision

Anyone would think property investment requires a handcrafted Swiss chronometer or perhaps even an atomic clock to get the exact timing for a property purchase just right.

It’s forgivable to get bogged down by timing issues. It happens in all facets of life.

I’ll start the fitness campaign after the upcoming social commitments. I’ll look for a new job as soon as the market improves. “I’ll start on the book when …”, I’ll paint that bedroom as soon as I finish the …”.

The property market is no different.

With so many constantly shifting variables to consider, procrastination is an understandable default mode when it comes real estate-related decision making.

The following are among just a handful of headlines in the deluge of emails received by this publication’s Editor in the past few days, all of which consider market timing.

Negative gearing debate shifts focus to timing of tax deductions

Westpac pushes back timing of next RBA hikes

Timing the market is enormously important for property investing

Wise timing helps improve recovery for mortgage borrowers in hardship

Anyone would think property investment requires a handcrafted Swiss chronometer or perhaps even an atomic clock to get the exact timing for a property purchase just right.

But the reality is different.

Property expert and strategist Steve Douglas, Executive Chairman, SMATS Group, asserts that timing is largely irrelevant. Clearly, paying too much for an asset, buying in the wrong location or stretching beyond your financial capacity can turn a good investment into a bad one.

His point is that waiting for certainty can become a strategy in itself and one that leaves investors perpetually waiting.

“Everybody still needs to buy a place to live,” Mr Douglas said.

That sounds obvious, but it shapes buyer behaviour during periods of uncertainty.

Buyers delay decisions because they expect prices to fall further, interest rates to change, government policy to become clearer or some other piece of the property puzzle to finally fall into place.

One week becomes another. The buyer who decided to wait last week joins the buyer who decided to wait this week.

And, as Mr Douglas put it, “the buyers have not left, they’re just waiting”.

A quiet market does not necessarily mean demand has disappeared. Some of it may simply have gone underground.

The danger of waiting for the bottom

There is plenty of evidence that the market has softened, particularly across Sydney and Melbourne.

Cotality’s latest figures show national dwelling values fell 0.9 per cent in August, the fifth consecutive monthly decline, leaving values 3.6 per cent below their March peak.

Its September Housing Chart Pack also shows the median time taken to sell a property has increased to 39 days, compared with 28 days a year ago, while the median vendor discount across the capitals has widened to 4.2 per cent. Total listings have risen above 139,000.

For a buyer, that creates a more negotiable market. It does not, however, automatically create a better market for procrastinators.

Mr Douglas said the distinction between searching for value and waiting for some mythical point at which everyone agrees the market has reached its nadir.

“If you want to find a bargain, go looking,” he says.

“Look at the individual property. Examine its location, land, scarcity, rental demand, comparable sales and likely long-term appeal. Establish what it is worth to you and whether you can comfortably afford it.

“Then make the decision based on those facts rather than trying to predict the exact week when the national market will turn.”

The other side of the property equation

There is another problem with widespread buyer procrastination: sellers can procrastinate too.

Mr Douglas pointed out the irony. Buyers are searching for bargains, but owners with good properties may be reluctant to sell because they do not believe they will achieve the price they want.

That reduces the supply of quality stock just when bargain hunters are becoming more numerous.

The result can be a market in which plenty of buyers are waiting for the right property, while plenty of owners are waiting for the right market.

Current auction data illustrates the standoff.

Cotality reported Monday (14 September) that the combined capital clearance rate had crawled off the canvas, lifting in a week from just 49.3 per cent to 58.5 per cent in the week ending 13 September.

Auction numbers rose by 11.4 per cent compared to the previous week but remained 33.6 per cent lower than the same period last year, marking the fifth consecutive week with a decline in excess of 30 per cent on the previous year. This decline is attributed to fewer new listings and a greater proportion of vendors choosing to sell by private treaty rather than at auction while clearance rates remain subdued.

That is hardly a picture of a market racing away from buyers but neither is it evidence that every desirable property will suddenly become cheaper.

The most recent data shows total listings are rising and buyers have more room to negotiate. That is precisely the sort of environment in which an investor with finance, discipline and a clear acquisition strategy can potentially act without having to compete with the frenzy seen in stronger markets.

The challenge is recognising the difference between caution and paralysis.

Certainty comes after the decision

The Reserve Bank’s cash rate is currently 4.35 per cent, following three increases earlier this year, and the next scheduled decision is not until 29 September.

Investors can spend an enormous amount of time trying to anticipate what happens next.

Will rates rise again? Will they fall? Will tax policy change? Will prices fall another 5 per cent, 10 per cent or 15 per cent?

Those are legitimate questions but there will never be a point at which every variable is known in advance.

As Mr Douglas succinctly put it, “Luck without action is worthless”.

A good property advertised at a price that stacks up does not become a better investment simply because an investor waits another six months. It may become cheaper. It may become more expensive. It may be sold to somebody else.

And once it is gone, it is gone.

Mr Douglas warned that investors should be careful about waiting for “that perfect property”.

That does not mean throwing caution to the wind. It means replacing the search for certainty with a clear set of investment criteria.

“Know what you want. Know what you can afford. Know what represents fair value and then, when the right property appears, be prepared to act, because the biggest timing mistake in property investing may not be buying six months too early.

“It may be waiting so long for certainty that the opportunity has already passed.”