Today, I want to discuss a crucial aspect for property investors: understanding the property market cycles.
If you’re considering entering the market or seeking further clarification on the property market and the property clock, this tip is for you.
Australia is a vast country with diverse property markets, so it’s essential to be specific about the location you’re interested in.
When you hear property market updates or price updates, always focus on the state and suburb level data, as it plays a significant role in your strategy and determining which part of the property clock we’re currently in.
Now, let’s delve into the concept of the property clock. Imagine it as a clock face with 12 o’clock representing the top of the cycle, where we experience robust growth and a booming property market.
However, at this stage, people start questioning whether properties offer good value, and factors like financing become more challenging due to changes in lending policies and decreased confidence.
Following the peak, we typically observe a stagnant phase that spans around two-thirds of the cycle. During this period, which is approximately from 12 o’clock to 6 o’clock, the property market tends to dip by an average of 5% to 10%, remaining relatively stable for a considerable period.
Once we reach the bottom of the market at 6 o’clock, buyers and investors realize that prices won’t drop any further and that property prices are stabilizing. This realization leads to increased demand, which in turn exerts pressure on prices and the number of properties available for sale.
From 6 o’clock, we start witnessing prices gradually moving up towards 9 o’clock. It’s during this phase, between 9 o’clock and 12 o’clock, that we often observe a real frenzy in the market, with an abundance of buyers and limited sellers.
Record prices are achieved, and auction clearance rates reach extremely high levels.
Traditionally, in Australia, the full property cycle, from the top of the market to the next top, has averaged between five to seven years for property prices to double in value.
However, the current markets differ due to various changing economic conditions that significantly impact the market.
Following the Covid-19 pandemic, we experienced an average of 30% to 40% capital growth within a short two-year period. Such rapid growth wasn’t sustainable in many markets, leading to a slowdown in recent months.
We are now witnessing the market turning around, with experts predicting that we have already passed the bottom of the market. This prediction aligns with the increased demand we are currently observing.
However, it’s crucial to refer back to the data to assess the market movement accurately.
Indicators such as higher auction clearance rates, reduced days on market, and increasing median prices, as reflected in CoreLogic data, are signs of market shifts.
Keep in mind that data is usually about three months behind, so timing the market perfectly is challenging since it’s likely to have already changed by the time the data becomes available.
While data serves as a valuable indication, it’s also essential to consider local market conditions and consult experienced professionals within the industry to gather insights into what’s happening on the ground.
If you are a short-term property investor looking to buy and sell quickly, timing the market becomes more critical. However, for long-term investors, whether you buy at the top or bottom of the market is less critical.
If you’d like to access more detailed data reports specific to the areas you’re considering for investment, please feel free to reach out.
I’m happy to provide you with the necessary information. To discuss further you can book a strategy call by clicking here.
Regards,
Geoff Tomkins
Buyers Advocate
PH: 0404 852 781
