by Administrator
3. January 2012 17:46
What are they?
Property cycles or market trends are terms that are used to describe sales activity in the real estate industry. Historical data shows that real estate values rise and fall in a cycle every 7-10 years. That is, from the time a property's value starts to rise, then falls, then begins to rise again.
Overall the price of anything is dictated by consumer demand, however other factors that may contribute to property value could be inflation, employment opportunities, interest rates and rental yield versus capital growth. Generally when the cost of rent starts to near the cost of purchasing a property, the value of property will rise. This is particularly evident when interest rates are low and employment opportunities are strong.
The key characteristics of a property cycle are...
- The time it takes to fall after they have reached a peak which is approximately one and a half years.
- After this time, the property market is usually overstocked and investors can take advantage of mortgagee and fire sales for the next one and a half years.
- As the housing supply dries up over the next year or two, prices tend to stabilise.
- After which market prices will begin to rise and the property cycle starts over again.
Western Australia experienced a significant boom in property prices over the middle of last decade. Since then prices have dropped significantly, however if the history of the property cycle repeats itself, it would indicate that now is a fantastic time to buy real estate. Ultimately, the most important thing to consider when entering the property market is not what time of the cycle you enter, but the length of time you are considering investing. Statistics indicate that over a long period of time (10-20 years) property investment will always be a clear winner. For more information about the price of real estate in your area, call H&N Perry's experienced Sales Manager, Frank Lawrence on 9535 1822.
