Buying with logic not emotion

BY CHRIS GRAY, CEO, YOUR EMPIRE

There are many mixed messages in the media and in our social circles about what’s happening in the property market and whether to buy now or wait

Most of us agree that buying an investment should be a 100% logical decision.

Buying a home is obviously emotional but there should be some logic to it too, given that it’s probably the biggest financial decision of our lives. When it comes to holiday homes, that is often 100% emotional, but again you would hope that some logic would come into it rather than completely throwing your money in to the wind.

So, what are the arguments for waiting or buying now?

Wait

1. It makes sense as interest rates have risen very quickly and there’s potentially more to come.

2. It might be very hard to admit to your friends and colleagues you’ve bought as they’re bound to question your logic.

3. Property is bound to drop, isn’t it?

4. Surely that mortgage cliff is going to cause many people to be forced to sell.

Buy now

1. We’ve gone through 90%+ of the pain of a dozen interest rises and so even if there is one or two more will it make that much difference?

2. Most capital cities have been rising for the last 3 months, with Sydney seeing 4.9% in the last quarter.

3. If a $1M property has risen by $49k, how long do you want to leave it till you jump in?

4. You’ve already missed the ‘bottom of the market’ and so what are you going to do, wait for the next one?

5. If you’re investing for 10 20+ years, even of you get it slightly wrong, time heals most issues.

6. That’s what contrarians do, “Be fearful when others are greedy and greedy when others are fearful,” Warren Buffet.

In my 30+ years of buying homes and investments both here and in the UK, I’ve found that most people are completely emotional when buying property even though they talk logically.

The majority of people find it easier to sit on the fence and do nothing, rather than be uncomfortable and make a decision.

We’re definitely seeing a range of sales prices in the market – some that are selling short, some on target and some that are selling over the odds.

My personal strategy seems to have worked well over the last few decades and that is to buy when:

1. When I have the deposit to buy

2. When I can get a mortgage and

3. When I have enough cash buffer to fund me for a few years.

I think differently to most people though. I’m an accountant and don’t have any emotion.