To learn more about the Property Cycle and the best locations to buy a property off the plan, visit our website at www.ibuynew.com.au.
When it comes to buying a property, the property cycle has a very important part to play. Whether you are a first home buyer or a seasoned property investor, understanding the property cycle gives you detailed insight into what the current property market is doing and whether it is a good time to buy.
To help give you a clearer understanding of the property cycle and the best times for you to buy your next property, our Senior Property Consultant Alex Goldhagen has put together a short video on the importance of the different property cycles and gives a thorough explanation of each of the stages.
View the transcript below or watch the video “Understanding the Property Cycle” now.
Hello and welcome to iBuyNew.
My names Alex and I’m one of the Senior Property Consultants here with iBuyNew.
In our latest video, Understanding the Property Cycle, I’m going to talk you through the importance of the different Property cycles.
Understanding the property cycle is essential for both home buyers and investors. With a little bit of patience and getting the timing right, you could make yourself hundreds of thousands of dollars in a very short period of time.
Every major capital city runs at a different cycle of the property clock and there are five main stages:
Bottom of the market
Peak of the market &
Ideally you want to buy property at the bottom of the cycle, whilst you should sell at the peak of the Cycle.
In other words, buy low, sell high.
Unfortunately hype in the media often confuses people and they buy and sell at the wrong times.
During the boom period people often buy because of the fear of missing out.
Just as bad, people resist buying at the bottom of the cycle because they think the property market is not performing.
Some even sell right before the recovery of the market missing out on tens if not hundreds of thousands of dollars.
Typically you will see 2-3 years of solid growth followed by 7-8 years of slow to moderate growth, we’re not saying property doubles every ten years but over the long term the longer a property is held the better it can be.
So how can you tell which stage a property market is at? Here is a quick overview:
Bottom of the market: The best time to buy
• Rental yields are strong 5.5%+
• Confidence in the market is quite low
• Rental vacancy rates will also be low, very tight
• And there’s not much in the way of new construction
Rising Market is the second best time to buy
• At this point the market has already shifted and we see prices start to rise
• Talk of a property bubble – and this happens all the time
• Rental returns start to flatten out to about 5% and there are more buyers entering the market
During the Boom which is the last opportunity to buy in the cycle
• Rental vacancies start to come back to the acceptable 2-3% range
• Media hype about the property market is high
• There’s High confidence levels
• And there’s Lots of construction
During the Peak of the market: At this stage it makes little sense to buy, unless there is a good bargain to be had.
• Prices hit their highest point
• Last minute buyers coming into the market trying to find a good deal
• Rental yields are now less than 5%
• Very high confidence
• But there’s also the Risk of oversupply in the market
Downturn: now this is where you will see an
• Affordability crisis with many priced out of the market
• With high prices and the inability to buy we see rental yields start to increase
• This period can last as long as 8 years
• Although seen as a bad period, it gives the market a bit of time to recover, salaries need to increase, rentals need to increase and these all happen very slowly until we get back to that 5-6% rental yield.
So to make your money work as hard as possible for you, you should refer to past property cycles before buying and try to buy in a market that’s rising.
Please do keep in mind that over the long term there is really no bad time to buy, typically speaking it is not timing of the market but time in the market.
One of the better strategies for an Investor is to have exposure to multiple markets running on different cycles, rather than concentrating your property portfolio in one location it makes sense to diversify into many major different major capital cities.
When one location isn’t performing you can rely on the others to pick up the slack.
If in doubt, speak to a Property Consultant at iBuyNew, we’d love to have a chat with you.
We can show you the best areas to buy into right now.
Give us a call 1300 123 463 or visit us at www.ibuynew.com.au.
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