In the past few years, we’ve seen so much movement in the property market. Despite the pandemic, the housing market in Australia has boomed in 2020 – 2021 and is now at the cooling or downturn phase of the cycle.
The property market cycle is one of the most important aspects of investing in Australia. It affects the value and price of properties, but also how quickly rates can rise and fall.
There are four phases of the property cycle: upturn, boom, downturn, and stabilisation. The property market cycle describes the movement of house prices through stages.
In this article, we discuss some lessons to learn in each phase of the cycle so that you can make an informed decision on when it’s best to enter or exit your investment portfolio.
Important lessons of property market cycles in Australia:
- Enter the market when you can afford to, not when you feel like you have to
- Interest rates can be a critical factor influencing the property market
- It’s better to buy before the upswing and sell before the downswing in prices
- You don’t have to wait until the bottom of the market cycle to buy a property
- Each phase of the property cycle affects different types of properties differently
Enter the market when you can afford to, not when you feel like you have to
The next time you’re considering buying a property, remember: It’s not about the money. It’s about what motivates you and your family.
If your motivation is financial gain, then it’s likely that the market will shift over time as more investors enter the market and begin making their own decisions about when to buy or sell.
If your motivation is something else entirely, such as getting rid of debt or settling down with children or grandchildren (or even pets), then this could be a good time for you to enter the market.
Interest rates can be a critical factor influencing the property market
Interest rates are a major driver of the property market. If you have a mortgage, interest rates will determine how much money you pay each month towards your loan and also what kind of house or apartment you can afford to buy.
When interest rates go up, this means that borrowers have more to pay back and, therefore, less money available for spending on other things. This can affect all types of property differently depending on their location and type.
While we are at the downturn phase in 2022, you must also consider the condition of the economy. Aside from the price of a property, keep in mind that interest rates can greatly impact your investment. Property prices may be going down, but there are concerns about the rising cash rates and inflation rates, which can affect your buying power.
It’s better to buy before the upswing and sell before the downswing in prices
The reason for this is simple: if you buy during a boom, then your property may not have any capacity for values to improve, and if you sell during a slump you’ll incur a loss with your property.
So before you take the plunge, take some time to know the condition of the market so that you don’t sell or purchase a home blindly.
The basic principle of investing is to buy low and sell high, and like any other investment, it’s hard to predict how long this phase will last or where the property market will go from here.
If you have the fundamental skills to identify the different phases of the property cycle, you can easily determine the best time to enter the market.
You don’t have to wait until the bottom of the market cycle to buy a property
The property market cycle in Australia is a complex one. It offers opportunities for investors but also presents challenges that can make it hard to predict how the market will evolve. Don’t wait for the market to drop. Don’t wait for the market to rise or stabilise.
You can make money in real estate by investing in properties that are currently undervalued and have room for appreciation, so don’t bother waiting for everything else (investment returns) first!
While many people wait until the bottom of a property cycle before buying, it’s not necessary to wait. Remember: the property cycle will vary for each location
Each phase of the property cycle affects different types of properties differently
Property buyers should know which type of property they want to buy and what phase of the market cycle they are in at any given time.
For example, if you want to buy a home in a good location, you may want to consider buying now before the market starts to pick up again.
If you’re looking for apartments with the goal of renting them out, now may be your best bet — because as rents increase across many locations, so will the value of your investment.
Property investors should consider all factors when making investment decisions. The property market is an important part of our economy, and we should always consider all factors when making investment decisions.
It is important for investors to keep an open mind when making investments in Australia’s property market. While there are several factors that can affect the profit potential of a particular transaction, it is possible to make sound investment decisions by considering all of them.