For property investors, the property cycle remains an essential guideline, helping to identify the best times to buy, hold, and sell in anticipation of what comes next. Influenced by various economic and social factors, the property cycle typically progresses through four key stages: Boom, Downturn, Stabilisation, and Upturn.
Ash Buyers Agency is your trusted partner in the Australian Buyer agent, property market, specializing in helping investors navigate the complexities of real estate. Our data-driven approach takes the guesswork out of property selection, connecting you with exclusive off-market listings and high-potential investment opportunities. With our extensive network and market expertise, we focus on maximizing value and minimizing risk, ensuring you achieve your financial goals in every stage of the property cycle.
How Long Does The Property Cycle Last?
Historically, the property cycle lasts around 7-8 years, but the phases are not fixed in duration. Instead, they are shaped by variable factors such as population growth, interest rates, government policy, and consumer confidence.
In Australia, it’s traditionally believed that house prices double within 10 years, aligning with the 7-8-year property cycle. However, recent property trends show slower growth over the last decade. Consequently, some experts predict a longer cycle, estimating the Australian property cycle could now stretch to 15-18 years.
The Four Stages of the Property Cycle:
Stage 1: The Property Boom
Supply: Mid-High
Demand: High
This is the phase that investors eagerly anticipate. During the property boom, prices grow rapidly, demand peaks and clearance rates soar. For those considering selling, this is a popular time to sell.
Typically lasting just 1-2 years, this stage prompts investors to monitor closely the closing stages of the previous cycle, allowing them to act swiftly and capitalize on the boom effect before it comes to an end.
Stage 2: The ‘Downturn’
Supply: High
Demand: Mid-Low
After a property boom, demand typically decreases while supply remains high due to ongoing activity from developers. This leads to the downturn phase, characterized by signs of change such as increased vacancy rates and declining rental prices. It is common to witness a decline in property prices during this time, and developers may experience redundancies and face financial vulnerabilities.
This phase often lasts 3-4 years but can extend further following a prolonged boom. As market dynamics shift, there is often investment caution among buyers, presenting an opportunity for savvy investors to capitalize on the market adjustment.
Stage 3: The ‘Stabilisation’ Period
Supply: Mid
Demand: Mid
During the stabilization stage, the market adjusts to an excess of property supply and reduced demand. Interest rates typically experience a decrease, leading to a gradual recovery in property values.
This period presents potential opportunities for investors, as lower prices and reduced market competition create an appealing time to buy.
Stage 4: The ‘Upturn’
Supply: Mid
Demand: High
During the upturn phase, supply is at mid-levels while demand remains high. As buyers return to the market, competition increases, driving down vacancy rates and pushing up rental prices and property prices. Developers begin significant projects to complete them as the boom phase approaches.
Typically, this upturn lasts 3-4 years as property prices grow, setting the stage for the next ‘boom.’ This period signifies a market resurgence, fueled by economic recovery and highlights the property investment potential within a thriving market. Enhanced opportunities and a positive outlook further characterize this phase.
Current Stage of The Australian Property Cycle
The current stage of the Australian property cycle is seen by some experts as the beginning of a new property cycle, marking the heart of the boom at the end of 2023 and the start of 2024. However, it’s important to note that property cycles may vary across submarkets, with different locations experiencing differently.
While national property prices have demonstrated strong growth over the past 18 months, cities like Melbourne, Hobart, and Darwin experienced slight declines in July. Typically, a property cycle reflects higher highs and lower lows, reinforcing the trend of increasing property values despite market fluctuations. This resilience of property values highlights the emerging opportunities within the broader economic landscape.
When to buy and when to sell property is a crucial consideration for many investors. A fundamental principle in property investing is to time your transactions according to the cycle: Buy when demand is low and supply is high, and sell when demand is high and supply is low.
When to Buy and When to Sell Property?
This principle closely aligns with market psychology. During the boom phase, many sellers become motivated to sell, which can lead the market into a downturn. Conversely, in the stabilization period, buyers enter the market, fuelling a boom as confidence returns.
As Warren Buffet famously stated, “Be fearful when others are greedy, and be greedy when others are fearful.” To effectively navigate market dynamics, it’s essential to be proactive rather than reactive, enabling you to stay ahead of the curve and make strategic decisions that can lead to successful outcomes. By doing so, you can be ahead of others and capitalize on opportunities as they arise.
When to Hold in The Property Market?
Determining when to hold onto a property is just as crucial as recognizing the right moments to buy or sell. One of the significant advantages of holding property is the opportunity to cultivate compounding wealth. As property values increase over time, you can build equity that can be reinvested in additional properties or other assets, creating a snowball effect that promotes growth. The rental income generated from your property can also be reinvested, further compounding your wealth. By holding onto the property through various market cycles, you can allow your investment to grow and appreciate, resulting in substantial long-term financial gains.
Knowing when to hold can significantly impact your investment outcomes, and the strategic timing of your decisions hinges on understanding the property cycle while aligning your long-term financial goals. This approach enhances your overall investment potential and contributes to a solid financial strategy.
Holding Property During The ‘Downturn’
Retaining property during a market downturn can be a strategic move, especially if you have confidence in its long-term potential. Although prices may be declining and rental incomes lower, holding onto your investment allows you to benefit from future market recoveries.
If you are optimistic about the property’s future appreciation and have a long-term strategy in place, maintaining ownership through this phase can be advantageous.
Holding Property in The ‘Stabilisation’ Period
During the market stabilization period, property values and rental incomes may gradually improve, making this an optimal time to hold your investments. By holding during this phase, you position yourself well for future growth, allowing you to benefit from a market that is setting the stage for the next upturn.
This period is an opportunity to consolidate your assets and prepare for potential gains. With a positive outlook, you can strategically enhance your investment portfolio for the future.
Preparing for an Upturn
As the market shifts from a phase of stabilization to an upturn, holding onto your property can be highly beneficial. With increasing demand and tightening supply, there is often a rise in property values. By maintaining your investment during this period, you can capitalize on growth and potentially achieve higher returns as the market reaches its peak.
Holding Property as an Investment Strategy
Regardless of the prevailing market conditions, holding a property represents a sound long-term strategy. Properties typically appreciate over time, allowing you to weather short-term fluctuations while benefiting from overall growth. This effective approach is particularly advantageous if your investment strategy prioritizes long-term capital appreciation and consistent rental income.
Knowing when to hold requires an understanding of your position within the property cycle, aligning with market conditions, and adhering to a long-term Property investment strategy. By embracing strategic holding, you enhance your investment resilience and unlock the growth potential.
What’s next?
Having a firm understanding of the property cycle will enable you to identify its various stages and plan accordingly. This knowledge empowers you to make the most out of your investment by making informed decisions on when to buy, hold, and sell. By doing so, you can maximise your property’s value, benefit from compounding wealth, and take advantage of future market opportunities. With strategic planning, you can enhance returns and achieve your investment goals.
For more insights and personalized strategies to navigate the Australian property cycle effectively, contact Ash Buyers Agency. Our experienced team of the best buyers’ agents in Sydney is dedicated to providing expert guidance, ensuring you make informed decisions on when to buy, hold, or sell your property. Reach us at +61 434 111 200 or email us at [email protected] for expert guidance tailored to your investment needs.
