Reducing The Volatility of Your Investments - Understand Property Price Growth
- Ryan Smith
- Aug 12, 2022
- 5 min read
Updated: Jul 4
Property price growth isn't linear, so having an effective investment strategy to smooth out your returns and reduce your risk is important.
Property price growth isn't guaranteed, but over long periods (10 years plus), it is almost inevitable that the market will rise in value. However, on a shorter timeline, there can be varying degrees of volatility.
Volatility is a simple but critical concept for investors in any asset class. In plain terms, volatility refers to unpredictable and sometimes sharp price movements in a market or asset. It’s the rollercoaster ride that makes investors either incredibly wealthy or incredibly anxious, often both.
Typically, highly volatile investments include shares, cryptocurrencies, futures, and anything else where prices swing wildly with little warning. When prices move up or down rapidly, it increases both risk and uncertainty, which directly impacts investor confidence.
Is Property Less Volatile?
Traditionally, property prices are considered a more stable, so the investment is less volatile.
It’s tangible, slow-moving, and not traded 24/7. But the last few years have proven that property markets are not immune to volatility. Interest rate shifts, tightening credit policies, government regulation, and economic shocks (think back to Covid times) have caused notable property price swings.
This leads to a crucial question: how do we manage volatility in property investing?
One answer. Dollar-cost averaging.
What is Dollar-Cost Averaging?
Dollar-cost averaging is a strategy used to reduce the impact of volatility on your investments by spreading out your purchases over time.
No one knows when something is at its cheapest or most expensive. We only know the top or bottom in hindsight. By investing at regular intervals regardless of the market’s ups or downs, you average the cost of your investments over time.
The dollar-cost averaging approach prevents you from going all in at the worst possible moment. It removes emotional decision-making, no more panic-buying in a hot market or freezing up during a downturn.
Beware the "expert" who claims they can predict the perfect time to buy. They can't. Nobody can - not consistently, at least.
Why Dollar-Cost Averaging Works in Property Investing
Unlike stocks or crypto, real estate purchases happen less frequently and require more capital, so dollar-cost averaging looks different in property.
You might spread your buying power across different types of properties, locations, or over multiple years, rather than buying 10 homes in 10 days.
Still, the principle remains: avoid lump-sum emotional buying, and let time work in your favour.
New investors often believe that finding “the perfect deal” is what separates good from great. But seasoned investors know: it's consistency over time that wins. Dollar-cost averaging in property means you’ll likely overpay occasionally, but you’ll also underpay at times.
And in the end, your average entry point is more likely to reflect fair market value. This smoother ride protects you from extreme downside risk while positioning you to benefit when the market eventually rebounds.
Real-World Example: NZ House Prices
Let’s bring this to life using the QV House Price Index:
September 2021: $977,456
December 2021: $1,053,315
March 2022: $1,046,636
June 2022: $1,011,188
September 2022: $956,592
That’s a nearly $100,000 swing in average values within 12 months.
Investors who jumped into the hype near the peak (Dec 2021) may now be sitting on paper losses, and maybe even some psychological stress.
By contrast, an investor who spread their purchases over that period would have bought some properties at high prices, yes, but also at lower ones. Their overall exposure would be averaged out, protecting them from extreme outcomes.
Buying the Dip: Why Not Just Wait?
Fair question. Wouldn't it be smarter to just wait for the dip? Surely that's the best time to buy.
Here’s the catch: you don’t know when the bottom is until it's already passed. Even professionals struggle with this. Waiting for the “perfect” time often means doing nothing and missing solid opportunities along the way.
Dollar-cost averaging allows you to gain exposure as the dip happens, not after it's over.
And with property being a long-term game (we’re talking 10+ years), whether you bought now or three months from now makes very little difference in the big picture.
What matters more is that you got in and stayed in.
FAQ: Dollar Cost Averaging in Real Estate
Q: Is dollar-cost averaging only for shares? A: Not at all. While dollar-cost averaging is common in a variety of forms, the principle applies to any market, including real estate.
Q: Can I use dollar-cost averaging if I can only buy one property per year?
A: Absolutely. You can spread your purchases across different years, price brackets, or regions. It’s not about frequency, it’s about consistency.
Q: What if I have a large lump sum ready to go?
A: You can still dollar-cost average by splitting your lump sum into multiple purchases or staggering over time. It helps reduce regret and improve resilience.
Final Thoughts: Play the Long Game
The core truth is simple: time in the market beats timing the market.
Dollar-cost averaging in property helps investors build portfolios strategically, not emotionally. It reduces the whiplash of market swings, builds resilience, and gives you exposure to the upside without being crushed by the downside.
Want to learn how to apply this to your property strategy? Book a time with one of our advisors today, and let’s build smart, not fast.
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We help Kiwis build wealth through property investment. Our advisors will take the time to understand your individual needs and recommend suitable investment properties to help you build wealth and set up your retirement.
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We use a 3-step process:
We start with a Discovery Meeting where we learn about you, your goals, etc. and you learn more about us.
This is followed by a Strategy Meeting where we model your retirement plan, understand key investment concepts and briefly touch on some investment choices.
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