To say Australians are pretty keen on home ownership is an understatement.
It is safe to assume that property plays a substantial part in conversations around water coolers, coffee machines, bar tops and indeed, at barbecues in people’s houses.
Sooner or later, if you socialise in any way, you are sure to hear about Kevin’s new pool; the bedroom the Smyth-Whittakers are adding to their house; the ridiculous price that a neighbour’s house sold for and, in more general terms, the whole boom, bust, bubble and crash debates that surface year in, year out.
The issue is that obsession with home ownership can often cost people money, especially when they see prices rising and think they need to get in and buy something.
They see prices soaring and friends making equity and become frantic that the gravy train has left the station.
When the opposite happens and the market goes down, people want to sell, sell, sell!
Before they lose more money. What a lot of people don’t understand is that not only has the gravy train left the station, but it’s an hour or two north on the express line, setting a course for easy street in a tropical destination somewhere.
But they should do the opposite; buy when the market is low and sell at the top.
Any good investor will tell you this. In fact the world’s most famous investor Warren Buffett built an empire worth billions on that principle…it’s the value buy.
Buy something for less than it is worth and you will make money (well at least that’s the simple version).
Despite what you hear in the media – much of which is aimed at creating sensational headlines- property prices move in cycles.
When prices fall, it doesn’t mean the end of the world is nigh, but rather that if you can pick the time when the market falls as far as it is going to, you can buy in at a rock bottom price.
Then, next cycle, you make some good equity. When properties have a big growth phase, this is followed by a correction, where prices fall slightly, before recovering and growing again.
Of course, not every property decision is made on market cycles, life gets in the way of things like that.
So, if you want or need to move homes in a hot market, consider selling and then renting for a while until the market cools down.
For starters, you can afford to rent in areas where a mortgage is too expensive.
Then, whenever repairs are needed, your landlord foots the bill. Renting for a couple of years and banking the money you made from selling is like taking a holiday from the stress of a mortgage.
On the flipside, if you are renting and need to move properties while the market is in a trough phase, consider buying a property instead.
You might find it cheaper to pay off a mortgage than rent and that you make some money in future years.
Tim McIntyre is the senior real estate reporter for the Daily Telegraph and News.com.au
Over the past decade, he has attained widespread knowledge of Australia’s many unique property markets and is an authority on all things buying, selling and investing.
His commentary appears every Saturday in the Daily Telegraph Real Estate lift out, as well as online at news.com.au