A cautious investor may choose to always err on the side of selling so as to lock in profits or protect against downside risk. This is alright if there are good reasons for this decision, but without facing a certain amount of risk, and allowing the market to appreciate, early selling is likely to be almost as expensive as a genuine loss.

There are many reasons not to sell any growth asset, these apply to property as well as shares. First of all is the expense incurred in selling, this is just the transaction fees. You pay a real estate agent a significant amount of money to sell a property, and there are other legal costs.

In addition to sale fees, if you have a made a capital gain and bought the property after CGT was introduced, you might lose a significant chunk of your capital through capital gains taxes. This is capital that you would have had working for you but is now on its way to the tax office instead.

These two reasons alone ought to be enough to convince you to drop the idea of timing the markets or trading properties, but there are other reasons.

If you sell to try to chase higher returns elsewhere you will most likely fail. Back in 1987 a lot of people sold their properties in order to get into the stock market. At that time it was apparent to many experienced stock market investors that the market was overvalued, yet the herd still came in in droves, often selling perfectly viable property investments to raise cash for it. At least for the next year or two, real estate made more sense than the stock market based on various value and cyclical arguments, however people sold too early just to chase the phantom gains of the 1987 stock bull market.

You should always think medium to long term about real estate investment. This by no means implies a passive approach, but it does mean that in the short term real estate returns can be very disappointing, especially after fees are taken out. Seeing profits to be made elsewhere while the property market marks time for a while is a very poor approach. Your selling decision should be based on objective analysis of the investment itself, unless there is genuine reason to be bearish on real estate and bullish on something else a sale may not be a good idea.

If the property produces positive cashflow, is in the "affordable" category of residential real estate and has stable tenants, the likelihood of a major fall in values is somewhat reduced. Buying and selling property is very expensive, in the lower end of the market there are less compelling reasons to sell out, especially if the mortgage is easily serviced.