How The Property Market Cycle Works
Building a successful property portfolio is all about doing your research, managing risk, and understanding how the Australian property market cycle works.
For investors who are keeping an eye on inflation and are feeling nervous on how rising interest rates may affect the yield generated from their assets, it’s important to avoid getting caught up in short term market fluctuations, and keep your eye on the long term prize. As such, getting familiar with Australia’s property market cycle is a great place to start.
Understanding The National Property Market Cycle
For those unfamiliar with the term, a property market cycle is a phrase used to describe the movement of house prices through various stages. Historically, these cycles are observed to start with a period of rising property values, followed by a lull period in which prices stagnate or even decline before starting to increase again.
Boom Phase - During a property boom, interest rates are often low and demand outstrips supply. Although usually the shortest phase in the property market cycle, it’s a great time to be a seller, as eager home buyers and investors alike tend to get carried away with a fear of missing out, further contributing to the boom.
Slump Phase - What goes up must come down, and market conditions often begin to slump when buyers can no longer afford asking prices, auction clearance rates drop, and there is an oversupply of properties. If the boom phase is long, it is followed by a deeper and longer slump, but does present great opportunities for both first home buyers and property investors.
Stagnation Phase - The stagnation phase is between peak and correction, when the market is stable and consumers begin to regain their confidence. The end of a stagnation phase is usually signaled by negative media reports dying down, prices begin to pick up, and buyers and investors begin to return to the market in larger numbers.
Upturn Phase - As confidence grows and activity returns, the market goes through an upturn. More properties are listed for sale, and there’s an equal or greater amount of buyers ready to purchase them. In turn, this accelerates the rate of price rises. It’s during the upturn that investors find the best opportunities, especially during the start of the recovery phase.
Although each stage of the property market cycle varies in length and differs between each of the states and territories, it generally reflects a range of socio-economic factors and conditions - which in turn influences the property market.
We're seeing a number of these factors currently at play now, such as government policies, the unemployment rate, interest rates, population growth, inflation, the value of the Australian dollar, and global events that can influence supply chains.
In Australia, the average property market cycle lasts between seven to nine years on average. Most industry experts tend to believe that seven years is the sweet spot, as historical data shows a pattern for the years where property growth has boomed - 1981, 1987, 1994, 2003, 2010, and 2017.
According to Quantum Buyers Agent founder Nick Esplin, paying attention to this data is a must for property investors who may be feeling insecure about the current state of the market.
“Since 1995, interest rates have fluctuated from 10% all the way down to 1.3% where it currently is today. In contrast, the median house price has steadily risen with consistent growth for the same period. Even during the peak of the global financial crisis, Australian house prices saw the steepest growth when compared to any other time during this twenty-five year period.
Each month, interest rates may go up or down slightly and will have a ripple effect on the economy, but it’s important for investors to think long term, and step back to watch how the median house price has grown over a period of two decades.”
Ultimately, successful property investing is all about building a diverse portfolio. To get the balance right and mitigate any potential risks, partnering with a Buyers Agent is a must. As the ultimate buyers advocate, a Buyers Agent represents the best interests of investors at all times, and provides unparalleled industry knowledge and access in order to make sound financial decisions for the long term.
Meet Your Property Investment Buyers Agents
Between finding the right property, scheduling appointments, and trying to find the time to liaise with the relevant industry professionals, it’s no secret that buying property can be a stressful experience - but the good news is it doesn’t have to be.
Servicing Brisbane and the Sunshine Coast, Quantum Buyers Agents are giving buyers the edge that they need to secure their ideal property. We partner with buyers to ensure that they have access to all the market intelligence needed to successfully secure the right property at the right time, while removing the stress linked to the process. Get in touch with us today to discuss how we can help bring your property vision to life.