Property Investment
Time in the market vs timing the market
Does time beat timing in property investment? See NZ's best and worst returns by years held.
Property Investment
3 min read
Last week’s newsletter said the bottom of the property market has been and gone.
I got mixed responses:
- “Is it really over?”
- “How can house price going up be a good thing?” and
- “Andrew, you don’t know what you’re talking about.
I want to respond to the negative replies … because they help clarify the evidence.
“What a load of dribble buddy” [sic]
Jamie-Lee emailed saying:
“What a load of dribble buddy” [sic] … “Clearly the last email [the prior week’s Private Property] was back and forth.”
“Maybe, maybe not this could happen but might not happen, no one really knows anything. But I’ll put this article out too try look smart.”
I get where Jamie-Lee is coming from.
Three weeks ago, I sent an email saying that different parts of NZ will bounce back at different times.
2 weeks later, I sent an email saying that the property market had bottomed out and prices were increasing.
It might look like these 2 newsletters are saying different things.
But both are correct.
On average, New Zealand property prices have bottomed out. They are on the increase.
But that doesn’t mean that your specific area is on the up.
Here’s a good example. We’ve just updated our Average House Price page.
You can use this to see the average property price of every council area in New Zealand.
Even though house prices are down 10.5% across the country (year on year).
Masterton property prices are down almost 20% over the last 12 months.
And Hurunui house prices (in the South Island) are up 6% year on year.
While NZ property prices might go in one direction (in this case, down) … parts of NZ can go in the other direction (in the case of Hurunui, they’ve gone up).
The same is true when it comes to the bottom of the market. NZ as a whole is on the up. But some parts are still falling.
Both statements can both be true.
“...a tiny blip up from the bottom doesn’t indicate house prices increase.”
Matt also sent me:
“ Morning. In precisely ZERO other industries would any group of co-opted organisations attempt to delude themselves like this.”
“A tiny blip up from the bottom indicates that “the downturn is over, we’ve hit the bottom, prices are on the increase!” etc etc” … “considering that property in NZ is the most over priced in the western world, and the least affordable it’s ever been – I doubt it.”
[I’ve condensed this down because it was long.]
Matt’s right. Property prices are up only 1.1% compared to where I think the bottom was.
It is a ‘blip’.
But here’s the thing. You can only see the bottom of the market once it’s over.
Back in 2008, property prices bottomed out in December 2008.
But if you were an investor trying to buy a property 2 months later, here is what you would have seen:
Property prices were up only 0.8%.
Too early to call the bottom of the property market.
But 12 months later, prices were up 5.5%.
Here’s what you would have seen at that point.
By the time the bottom of the market was clear ... it was also too late to take advantage.
So, how do you make the call to invest or not?
Property investors have to make decisions based on incomplete information.
The future is always uncertain. It hasn’t happened yet.
So today, we can’t point to a graph to say, “That was it. June 2023 was the bottom of the market.”
But we can still look at the facts to make a judgment call.
5 things that suggest the bottom of the market has been and gone
- 1) The Reserve Bank updated its forecast (last week). They think the downturn is over
- 2) REINZ released new data (last week) showing that NZ property prices are recovering
- 3) More real estate agents say prices are increasing than those who say they are decreasing
That’s according to Tony Alexander’s Real Estate agent survey, which came out 2 weeks ago.
- 4) OneRoof released data showing that the downturn was over in our major cities (this morning)
- 5) And I’m seeing it myself.
Every month, my team here at Opes Partners helps 40 – 60 Kiwi couples buy investment properties.
We’re seeing these numbers increase. Developers I talk to also say they are starting to get busy.
The evidence is mounting that the downturn is over.
Can we definitely point to a graph and say the downturn is over? No.
But by the point we can, it’s too late.
Andrew Nicol
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
