We've all heard the adage ‘As safe as bricks and mortar', but according to Property Analyst and NPA Property Group CEO Craig Whaley buying and selling trends are proving contrary to this adage in many cases.
According to Mr. Whaley, many people are falling victim to the largest mistake made by Property Investors.
"Irrespective of whether the investor is from Sydney, Melbourne, Perth, Adelaide or Darwin this same mistake is made over and over and over again". The mistake being made is not understanding and utilising Property Cycle data to their advantage".
To explain this, we must first look at history. Over two hundred years of recorded data has shown quite conclusively that Australian Property Markets have generally doubled every 7 - 10 years when averaged out over this period.
On the other side of the equation, research now suggests that between 50-60% of property investors in many areas are selling their property between year 2 and year 7 of ownership.
Mr. Whaley refers to this period of time as ‘The Grey Zone'.
So here we have a massive quandary. One side of the equation represents the historical nature of property price movements and the other side of the equation represents in alarming numbers why a lot of investors are failing to capitalise on this growth because they have sold their property to someone else.
Why this is occurring?
According to Mr. Whaley it is easy to explain why. "A lot of property investors are not understanding the nature of Property Cycles and buying and selling at the wrong time."
History has shown that generally 60-70% of the growth in a given property cycle happens in about 30% of the time. If we were to look at a property cycle historically as a 10 year period, this would conclude that 3 out of every 10 years is the exciting time and unfortunately 7 out 10 is relatively boring. It's this 7 out 10 years that leads to the problem. As investors get caught in this slump they don't necessarily know when or if the property they are investing in will go up in value. Unfortunately the longer the slump goes the more people sell. They question their purchase or get disillusioned and sell their property.
In reality the longer the slump goes the closer they are to the next upturn, but unfortunately a large number of investors won't have exposure to the market at that time as they have already sold their property.
For those investors that do get caught up in the upturn or boom in the market in which they invested another problem can occur. An Investor will see a price movement and not necessarily see the value of this growth unless they sell their property to crystalise their profits. Their profits could then be diminished as they sell well before the end of the upturn, missing out on further growth and also encounter sales fees and Capital Gains Tax to further diminish their gains.
Craig Whaley's DVD on "How to avoid the two largest Mistakes made by Property Investors" is available online at www.npapropertygroup.com.au
Craig Whaley is a Property Analyst and CEO of NPA Property Group.