Reload original page
Market Update:
29th July 2010
Quick Summary:
Introduction
This update begins a new series on how you can achieve above market growth returns from property. Keep reading to find out why 'timing' the market is more important than 'time in' the market.
Profiting from capital appreciation - where your property increases in value - is the reason why people invest in real estate.
The 'buy and hold while your property appreciates in value' strategy is seen to be a sure-fire wealth creation winner, because, in Australia at least, median house prices have trended upwards for the past three generations.
In other words, there's no one alive today who can remember a time when property prices fell dramatically, and therefore, just as the sun rises in the east, property prices are expected to rise over time.
A Shocking Truth About The Buy & Hold Strategy
While it's historically accurate to say that the median house price in every Australian capital city is worth substantially more today than a decade ago, it's inaccurate to say that property prices have increased in a steady or even rate over time.
That is, normal market cycles mean that there will be times when property prices go up, are flat, and even decline. Would you agree?
Certainly, the research I did for the revised edition of my first book indicated that between 1980 and 2009, property prices only increased by a maximum of 38% of the time (depending on where you live in Australia), fell by up to 17% of the time, and were flat for the majority of the time.
Would you be excited about applying a strategy that didn't work for most of the time? I wouldn't!
This leads to an important conclusion every investor seeking to maximise their wealth must know: the general strategy of 'buying and holding for general market growth' provides an outcome where the majority of the time you won't be earning any profit at all.
In summary, Hot Tip #1 is: 'timing' the market (i.e. your entry and exit) is more important than 'time in' the market.
The Correct Application Of Buy & Hold
You don't have to be a buy, hold and hope investor. By applying a little more science and investing skill (as I've outlined below), you can position yourself to earn bigger and faster capital gains in almost all market conditions; yes - even if the market crashes.
For example, although the US property market is considered to be a disaster for growth investors, there are areas where prices haven't fallen at all (such as the large cities of Texas).
The secrets to consistent above-market capital gain returns are:
1) Timing your entry to the market as values start to rise
2) Buying the 'right property' in the 'right area'
3) Reinvesting (rather than holding) when you can earn better returns elsewhere
I reckon I could write a whole book on the three points above ("Why don't you I hear you ask..."), but, for the sake of my sanity (and maintaining a happy marriage), I'll limit my outline to further updates, so stay tuned.
Previous Updates
Refresh your memory or catch up on previous updates at: http://www.propertyinvesting.com/weekly-updates
