The Property Cycle
It is key to property investment to understand that the market moves in a cycle. Watching long term, you will notice the cycle lasts for around seven to ten years. Over this time four phases will be evident: a flat stage with no real price rise; a growth stage when prices begin to go up; the peak stage which is the highest point in the cycle and the correction stage where prices cool off or, sometimes, stagnate. Ideally, after the cycle has run a full course the price of property will have doubled.
The last six months has been an interesting time for the Australian property market.
• Australian house prices have entered a negative annual trend for the first time in six years
• For the first time since 2012, there were more units than houses sold at auction
• The number of properties successfully sold at auction is at a six-year low, below 60%
While there have been some specific factors – the Banking Royal Commission for example – that have impacted this, there is also a feeling that we are seeing the end of a cycle that has confounded expectation for the last few years and we are entering a cooling market. The property cycle can also effect associated industries such as online classifieds companies that rely on property listings for revenue, as outlined here.
In a cooling market, it is important to find the areas where gains can be found. Avoiding areas where there is an oversupply is a key strategy; there is evidence to suggest that apartments in Melbourne’s centre fit this category. There is no doubt that investing in a cooling market requires more research and effort.
The property cycle can also effect associated industries such as online classifieds companies that rely on property listings for revenue.
Regardless of the stage of the property cycle, Accrue Real Estate has the expertise and market knowledge to help with to decide if the time is right for your property investment. Learn more about Melbourne property investment opportunities by contacting Accrue Real Estate today.