I often hear of property investors purchasing in different states within Australia to capitalise on different market movements. I find this type of investing a bit speculative as the only profits that can be made is when we see market movement. At Multiply Property Group we encourage manufactured growth. We also look at ways in which our clients can minimise risk and if their portfolio is heavy in a particular state and or area we may then look at purchasing in a different area by using the property clock.
The property clock is a very natural reoccurring cycle that the property market goes through. For those that have never heard of this, I would like to explain to you what this is and the importance of understanding it to ensure that your portfolio works best for you.
A typical property cycle lasts between 8-10 years. This is the time it would take to do a full cycle. Please note that each phase of the cycle does not occur in equal time frames. The property clock comprises of the below stages. Boom, Slow Down, Slump and Recovery. You will note the key indicators that the clock progresses through as the property cycle moves.
It’s important as investors to understand where we sit in the cycle to ensure that our capital can make the quickest returns.
BOOM- This is when property prices are increasing rapidly. There is generally a lot of turnover in sales, stock levels are lower and decreasing. There is hype and excitement and the majority of buyers compete with one another to purchase a property. Just a word of advice; competition in a property purchase is never good as it increases prices. This is the time smart investors would be selling if they wanted to off load stock as opposed to purchasing.
SLOW DOWN- This is generally ignited through the media and talk of an affordability crisis. As well as an oversupply of new product hitting the market. This is generally the result of developers getting into the market while on the rise however as you know it can take time before the finished product actually comes onto the market. As such stock levels increase, while the buying pool is starting to decrease.
SLUMP- As a slow-down in construction occurs, there will be an increased amount of tradespeople, prices will be falling. At the bottom of a slump we will hit the Bottom of the market. At the bottom of the market there is a sense of no confidence in the market. There are more properties on the market then sellers and as such is a Buyer’s Market. This is the prime time for property investors to be buying as they can negotiate not only great prices but good terms.
RECOVERY- A recovery will start to occur when the numbers of properties on the market starts to decrease. Overall people’s sentiment is starting to improve. As property stock decreases there is more demand for the property. As demand increases so too does the price. As prices start to increase we progress back through to a boom.
So for investors looking at buying, the best time to buy is when there is no confidence and more sellers than buyers. The best time to sell a property is at the top of a boom. When there is more buyers then stock. Picking the very top and the very bottom of the market can be difficult however based on the indicators you can get a good feel of where the market is heading.
The majority of our clients purchase properties to add value. However, for clients that have a very swayed portfolio or top heavy in one specific region and or State. They may consider other areas that are in a different property cycles. To create a portfolio that is countercyclical and minimise risk.
If you are keen to learn more about the property cycles or how Multiply Property Group can help you with your next property purchase. Or how you can capitalise on the Perth Market- Buyer’s Market.
Contact us at firstname.lastname@example.org
or (08) 9418 7529
The best time to invest is when competition is low and supply increasing, it means you can get properties at discounted prices and great terms! At Subpro we look at how you can control your asset and increase its value through value- add strategies. By doing this you are not reliant on the market- you … Continue reading “Expert Property Investor reveals the simple strategy she used to build a $6.2M property portfolio in the Australian Real Estate Market”