IIM Blog

29 August 2024

When it comes to property investment, the question everyone asks is: "Where should I buy?" It’s a multi-million dollar question that often gets answered incorrectly. A common scenario is witnessing a neighbour buy a house in your area, and you can’t help but think it’s a missed opportunity. It's not uncommon for people to be surprised when I reveal that I haven't even seen some of my properties. The truth is, the location isn’t always about proximity or familiarity—it’s about timing and potential.

The essential strategy in property investment is to focus on areas that are on the rise, not those that are already at their peak. This approach can be understood through a concept I refer to as “The Property Clock.”

Imagine a clock face representing the property market cycle:

• 12 o'clock signifies the market peak.
• 6 o'clock represents the bottom of the cycle.

The optimal investment time is around 7 o'clock. This is when the property market is poised for growth, offering the best chance for significant returns as the market progresses toward its peak. Purchasing a property in this phase means you can capitalize on the upward trend, leading to considerable appreciation in value.

Avoding the Common Pitfalls

Many investors, however, tend to buy at 10 or 11 o'clock, when the area is already receiving media attention and is experiencing high success. The issue with this strategy is that by the time an area becomes popular in the media or among the masses, the opportunity for high returns has likely diminished. You end up paying a premium for a property that’s nearing its peak, with less room for substantial growth before the market hits its zenith.

On the opposite side of the clock, between 1 and 6 o'clock, the market is in a downturn. Properties bought during this period are often undergoing a period of decline, and investors might face several years of stagnation or slow growth before the market recovers. This can be particularly challenging for new investors who need significant growth to build and expand their portfolios.

The Long-Term Perspective

Ultimately, regardless of when and where you buy, property values tend to rise over time. However, the savvy investor knows how to optimize their investments by timing their purchases correctly. By focusing on emerging markets and avoiding areas at their peak or in decline, you can maximize your returns and build a successful property portfolio that enhances your financial future without straining your lifestyle.