Waiting for the ‘perfect’ moment to invest? It could cost you

He said that by trying to time the market perfectly and base their decision on short-term blips instead of long-term fundamentals, investors can miss opportunities and jeopardise their wealth creation goals.

While many investors decide to purchase at the bottom of the cycle and sell at the peak, Tiller said it wasn’t possible to know the exact stage the market was at until it had passed.

“By the time everyone agrees that the market has turned, it usually has, and you’ve missed that peak,” he told SPI.

Additionally, while investors often believed a fall in property prices was automatically a bad time to sell, he said it actually depended on what their goals were.

“If you’re selling to buy again or if you’re selling to buy into the same market, that timing doesn’t matter so much,” he said.

Similarly, he argued there was a cost of waiting to buy or sell a property, as investors may miss a valuable opportunity to enhance their wealth creation.

“You may miss that one property that is currently on the market that would be right for your investment, your portfolio, because you don’t know what’s happening six or 12 months down the track,” he said.

Tiller said the COVID-19 pandemic was a prime example of a time when some investors chose to act during uncertain conditions, and achieved better outcomes than those who waited.

While particular holiday areas saw a surge in investment during that time, there was ultimately a lack of uncertainty over what would happen once the pandemic was over.

“Investors sold out of some of those markets because of the uncertainty around people holidaying in domestic tourism,” he said.

“Then 12 months later we saw some of those regional, or holiday markets, become the biggest beneficiaries of the work-from-home population boom, and they actually saw some of the biggest growth in those areas.”

Additionally, Tiller said many investors made the mistake of listening to broad national headlines as opposed to focusing on the underlying fundamentals.

He said the national headlines didn’t tell investors specifically how an individual suburb or a region was doing, as the property market was made up of thousands of micro markets.

“So understanding what’s happening within specific regions, postcodes, and suburbs, and the key drivers of those markets, will distinguish between what’s a short-term blip and a long-term opportunity.”

Tiller said an influx of migrants to an area at a time when there hadn’t been any supply, but a lot of housing under construction in the area, might only be a short-term blip.

On the other hand, he said the development of a major facility, like a university, might attract a population for the long term and help to sustain value in the region if it coincided with housing shortages.

Tiller said every market had its own drivers that made it possible to distinguish between short-term and more prolonged conditions.

“Just having a look at those headline numbers from the economic perspective means you’ll miss opportunities at a micro at a suburb level,” he said.

When it came to the impact of interest rates on investor choices, Tiller said that there was no one right move, as it came down to each individual scenario.

“Some interest rates won’t matter. For others, it can mean the difference between overleveraging yourself within your portfolio too much,” he said.

“Current government policies, tax policy settings – we know what they are today, but those things may change next month or in six months time, and that could help, or it could hinder the market conditions.”

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