Patience Key for Long Term Property Investors
With all the mainstream media hype around Australia’s property market being a ticking time bomb, coupled with pessimistic predictions of a looming crash, you could be forgiven for thinking that we are headed for a real estate bloodbath.
Smart investors know better than to react to short-term market changes, but the ability to keep your cool and stay focused is in short supply when it comes to investing. Time and again, we see investors unwittingly derail their investment strategy with their own behaviour as they indulge in panic selling, unduly ebullient buying, and attempts at outsmarting the market.
One thing we have learned from over 15 years of assisting clients with their property investments is that there are no certainties, but over the long term, markets are rational and patient investors who stay the course are richly rewarded.
Here’s how you can be a patient investor and avoid the pitfalls of short-termism.
Don’t let (your) panic drive your investment decisions
Billionaire investor Warren Buffett cautions investors to “look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”
While less astute investors head for the exit, spooked by cooling markets in Sydney and Melbourne, patient investors recognise that persistent negative market sentiment is actually to their advantage. Savvy first home buyers who have been waiting in the shadows will be particularly buoyed by weakening prices. They should be on standby, ready to follow the lead of experienced investors who are now starting to hunt for good buys that will grow in value over the years.
Weather any short-term storms with a long-term strategy
Just as they always have done, housing markets will continue to move through periods of growth, decline, and stable conditions. History shows that, over time, housing market cycles tend to smooth out the year to year volatility in growth rates, with long-term historical gains observed in real estate investment.
For example, whilst Sydney and Melbourne are undergoing a small correction, many other parts of Australia are experiencing growth. In Australia, different parts of the country are often at different stages of the cycle. If it is part of your strategy, there is almost always a good time to purchase a property somewhere. You just need to know where to look.
Decades of data paints a clear picture of just how resilient the Australian property market is. Despite year on year variation, Australian residential property outperformed all other asset classes for the 10 and 20 years to 31 December 2017. Looking further back, Shane Oliver, chief economist at AMP, notes that the average annual return on Australian property (11% pa) has been double that on Australian bonds (6% pa) over the last 113 years.
The lesson? You can’t control normal market movements, but you can control your investment strategy. If your investment strategy is geared towards the short term, chances are you will be feeling on edge at the moment. But if you’re in it for the long term, you’ll be set to ride out the peaks and troughs of the market and capitalise on the strong underlying trends.
Understand that property investment = business
Take it from the Vision Property & Finance team who have helped grow wealth for thousands of investors: successful investors treat their investments as a business venture. You need to adopt the same way of thinking.
Emotions, guess-work, and short-term vision have no place in business; the same goes for investing in property. Whether you are a seasoned investor growing your portfolio or a budding investor looking to dive in, it’s time to build and grow your investment property portfolio within the context of a comprehensive and well-structured strategy.
Start by surrounding yourself with an expert team who can help you formulate the right strategy and get the right financing to help you reach your property investment goals.
And once in place, smart investors know that it’s wise to step back and give the strategy time to work. When it comes to investing, patience is your best friend.
Need guidance on how to devise a successful real estate investing strategy? Let your best investment decision be to contact us for a consultation. Phone us on 1800 004 663.
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