Monday, 27 July 2015

The Property Cycle... not a "boom" and no "bust" coming.

The Australian Property market moves in cycles…

Not as the media would have you believe “booms” and “busts” but in regular and reasonably predictable cycles.

And those cycles are tracked by Property Valuers and Property Research businesses. (see below where your city fits)

 You might have heard that property doubles about every 10 years and if that were true then property would go up in value by 7.2% each and every year.

But we know that it does not do that!
Instead it goes in cycles of about 10 -12 years… And different locations will be at different stages in the cycle at any particular time.

Typically you will see about 5 - 7 years of property going nowhere or even slightly down in value…

Then there will be 3 – 5 years of rapid growth… double figures!  

That is where the media gets excited and calls it a “boom” but it is not…

It is just the normal cycle.


So why is this relevant?

Well it is a fact that about 70% of people who invest in property will sell out in less than 5 years and never invest again.

Many do that because they invested in the wrong part of the cycle for the location that they bought their property.

Hence the first few years of their ownership of a particular property they saw no growth… they just had expenses.

And others will simply pay too much in the first place.

So it is important to not only consider location and price but to consider the property cycle before you decide to invest in a particular location.

That way your property investment should increase in value from day one and within a short period (12- 18 months) have created enough equity for you to buy another. At the very least enough growth to demonstrate that property investment works.

On the property clock above you want to invest anywhere between 7 o’clock and 10 o’clock. (about 3 - 5 years)

And you definitely don’t want to invest anywhere between 12 o’clock and 6 o’clock. (In overly simplistic terms you could consider each hour of the clock to represent approximately 1 year*)

I hope that helps clear up the “boom” that we are hearing about in the Sydney market at the present time.

There shouldn’t be a bust coming for Sydney. It should just be a regular slowdown of growth.

Going forward should be Melbourne and Brisbane’s time in the sun… then later Adelaide and Perth.

So I am off to Melbourne to look at some new developments and expansions to existing developments.

Then in the next few weeks I will be off to Brisbane.

That way I can offer you the best locations within the cycle for your investment growth.


*the above representation of 1 hour of the clock representing 1 year of the cycle cannot be relied upon as an accurate measure of time within the cycle. It is meant as a guide only.



1 comment:

  1. Very informative post. Thanks for sharing your ideas with us.

    Augustus @ Kroma Tower