When you read in the media that the housing market is on fire, you get pessimistic with FOMO (Fear of Missing Out) gripping your investment strategy. When the market speculators suggest the house price might drop, you rush to sell and/or put your buying decision on hold for a better deal. Track2Realty analyses whether home buyers can time the market.
Are you a home buyer or a speculator? Are you a fortune teller equipped with forecasting to time the market?
When Ben Franklin said that a penny saved is a penny earned, little did he realise that the philosophical words would be taken to heart in the housing market far away in India. Very much like the stock market where investors try best to time the market, the Indian home buyers too have this perennial quest of timing the market. Irony is that in both the stock market as well as the housing market a vast majority of investors fail to time the market.
It is hence a subject of understanding, if not debate, as to whether one can time the housing market. What is timing the market? In its theory, timing the market is the strategy of making buying or selling decisions by predicting current & future price movements of the market. Market timing is hence a prediction that is based on an outlook of market and/or economic conditions deriving from technical or fundamental analysis.
In his book The Illusion of Control, Jon Danielsson mocks at the attempts to measure and predict risk and time the market. Calling it “risk theater” than credible analysis, he maintains that to properly assess risk, we need to recognize that different investors care about different things, depending on their level of exposure and their time horizon. Such accuracy looks impressive but bears little correlation to what actually takes place.
Real life case studies
Lose-lose proposition for home buyers: Post the pandemic, Rachit Sheth, an accountant in Mumbai, waited for the property market to crash. He wanted to enter the housing market at the rock bottom price level, anticipating that the prices would crash as a post pandemic shock. However, this buyer soon realised that the property prices in Mumbai suburbs rather strengthened and he had to shell out nearly 10 per cent more for the property that he had zeroed in.
Investors ride luck & intuition: Rakshit Srinetra, a property agent in Gurugram, advised his clients to invest heavily in Golf Course Extension Road of the city. Equipped with the market fundamentals, aware of the fact that the Golf Course Road is getting saturated, and also added with the information about upcoming infrastructure connecting the Extension Road, he could successfully time the market. His clients made a fortune in the last 5-7 years since they could time the market.
Time than timing the market: Two friends, Raman and Sunanda, bought the apartment in Hyderabad on the same floor of the project. Raman thought he is smart enough to time the market but the housing market at that point of time was stagnant in the Gachibowli area of the city. He exited after 4 years with notional loss calculated with the holding cost of the property as well as the capital gain tax. However, Sunanda could see the prices skyrocket in the next 7-8 years and she sold it off with a net profit of 40 per cent.
Factors to watch out
Macroeconomy
Job market
Interest rates
Demography & supply
Government policies
Consumer confidence
Industry view point
Aditya Kushwaha, CEO and Director Axis Ecorp agrees that most people want to time the market to get maximum returns. However, it is not easy to keep track of these cycles. Buying a home is a big financial decision, but it is also an emotional one. People may put off buying for a while or deliberate on their aspirations. They may also look at picking properties that they believe escalate better.
“Underwriters and institutions can cut better deals as they are better informed about the market scenario and the requirements of a developer. For them, that time is a good time to invest when prices are expected to increase soon,” says Kushwaha.
Vinit Dungarwal, Director at AMs Project Consultants also agrees that it is the institutional investors’ game play and definitely not the home buyers to time the market. According to him, it is difficult for homebuyers to time the real estate market. Not all are looking at real estate for investment purposes. For some, it is about home ownership as well.
“Through the use of AI tools and predictive models, institutional investors can have a better understanding of trends and can better time the market. They are using new-age platforms to keep a close eye on the variables and make investment decisions based on the data they have at their disposal,” says Dungarwal.
In conclusion
The housing market cycle is closely interlinked to the macroeconomy in general and the job market in particular. However, the business itself has its own microeconomy of sorts and demand & supply dynamics play an equally important role. So, one can never predict whether or not the housing market will generally do well since the overall economy is doing well. It is like the stock market going up doesn’t mean all the stocks or indexes are equally responding.
Analysts world over believe that the real estate cycle runs into four phases – Recovery, Expansion, Hyper Supply and Recession. It is not easy to assess that a home buyer is in which cycle till the cycle comes to an end. Real estate cycles are unpredictable and not all the four phases go through the same length of time.
Most of the on-ground players hence believe it is much easier to predict the macro level housing market but not at the micro level. They hence advise the end user home buyers not to speculate and try to time the market. On the other hand, investors with better risk appetite and holding capacity can afford to time the market as early bird entries.
Ravi Sinha
#RaviTrack2Media
Ravi Sinha is a journalist with over two decades of cross-discipline media exposure. He is the CEO of real estate thinktank group Track2Realty. He has been writing extensively on the real estate sector for more than a decade now. Evaluation of real estate brand performance is his core domain expertise and he has immense insight into consumers’ psychograph. He has conceptualised Track2Realty BrandXReport as India’s 1st & only objective & non-paid brand rating journal that is industry-accepted benchmark of brand equity & ranking of the Indian real estate companies.
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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