As most of you know, the property market - like any market that operates on supply and demand - moves in cycles. History tells us that this cycle usually (but not always) runs for about seven years.
Plus, during a boom developers get busy building so it is Half that time is marked by a period of slowdown and stabilisation, as boom-time prices give many investors and homebuyer's cold feet. not uncommon to be left with an oversupply of real estate for sale, which can take some time to shift. It is during this stage of the cycle that a lot of people think of rental properties instead of buying.
This strong demand for rentals takes us into the second part of the cycle, when improving yields can draw investors back and the market picks up.
So currently at what stage of the property cycle are we
Towards the end of 2003, if we look back, there were the first signs of a slowdown, when two consecutive interest rate rises followed by negative press alarmed buyers away from the property market. Homes for sale in Australia have seen prices even out and, in some areas, decline (with the exception of WA and the NT). This is a stage of the cycle which experienced investors are used to riding out as real estate allows for affordability to readjust.
It is during this transition that real estate listings tend to be on the market for longer. Rental vacancy rates decline, rents start to steadily increase, and more sellers are forced to reduce asking price for homes for sale.
These are all characteristics of today's market in many parts of Australia. We are now well into the next cycle, and increasing rents and rental properties, combined with stable property prices are beginning to lure investors back to commercial real estate and homes for sale.
While it's useful to take the property cycle into account, successful investors are those who rely on the history of property growth and make their asset selection based on proven fundamentals. Well-chosen commercial real estate and property for sale will always increase in value.
Therefore, whether the next upswing is one, two or three years away, one thing is certain - you cannot stop a cycle. In addition, it is always preferable to be building a successful portfolio at this stage of the cycle than when prices of property are peaking.
