We all know the property market moves in cycles.
But today I’d like to introduce you to another way of looking at this cycle to help predict what’s ahead for our property markets.
Typically the cycle is depicted in 4 stages.
The boom followed by the downturn, followed by the stabilisation phase which leads to an upturn which sets us up for the next property boom.
I’ve drawn it as follows:
I’m often asked how long between one property cycle and the next
A “7 year property cycle” is often referred to by property market commentators, but it’s rarely seven years.
In fact, average Australian capital city prices have had multiple cycles over the last 15 years with booms around 2003, 2007, 2010 and the one we’re currently experiencing on the east coast of Australia.
Of course the length of a property cycle has nothing to do with the number of years.
Cycles are driven by a series of socio-economic factors, but over the years I’ve noticed that the nature of our property cycles is changing and up until recently they seemed to be getting shorter.
Also the cycle is better seen in terms of the rate of property growth, as not all downturns or bust phases have price declines, but rather just a slowing.
However the current property cycle is likely to be different!
It seems that we are heading for a period of low interest rates, low inflation and lower capital growth that should prolong the current property cycle.
By the way… we’ve experienced similar conditions before in the 1990’s.
Looking back these were good years in property – at least they were for me – and I’ve already set myself up to take advantage of the next few years.
Of course the cycle can also vary from city to city.
Recently only the Sydney and Melbourne property markets experienced strong boom phases.
And there are even cycles within cycles within each capital city.
Interestingly in all the years I’ve been tracking real estate, I’ve never seen our property markets as fragmented as this.
WHAT FACTORS INFLUENCE THE PROPERTY CYCLE?
The main factors driving the property cycle are:
- Interest rates and the availability of funds to buy property – when money is cheaper (interest rates are low) this is positive for property markets
- The Economy – business confidence , employment prospects, jobs growth and wages growth all create demand.
- The availability of supply of property to meet this demand.
- Consumer confidence
- Demographics – in particular household formation (again affecting demand)
The Wilson Curve
Interestingly Dr Andrew Wilson, Chief Economist for the Fairfax-owned Domain Group and one of Australia’s leading housing market experts, presents the cycle in a different way.
He uses another model that he calls the Wilson Curve which gives a very different perspective of what’s going on.
Wilson also says house prices typically rise and fall in an underlying cyclical pattern.
The house price cycle also typically follows the business cycle with local supply and demand factors determining its characteristics
The house price cycle, as with the business cycle, consists of growth and decline phases.
The Wilson Curve above describes the growth and decline phases of the house price cycle in relation to its price peaks and price troughs.
The 30 second video below shows you the Wilson Curve in action:
The Wilson Curve consists of…
- The Correction Phase – House prices are below the previous price peak of the cycle but above the previous price trough of the cycle
- The Contraction Phase – House prices are below the previous price trough of the cycle
- The Recovery Phase – House prices are above the previous price trough of the cycle but below the previous price peak of the cycle
- The Expansion Phase – House prices are above the previous price peak of the cycle.
Where is each State in the Wilson Curve?
At my upcoming round of national property seminars in 4 capital cities in March and April I have organised a panel of experts, including Dr. Andrew Wilson, to give you their unfiltered and unedited analysis of where we are heading as a country and how that will affect you, your family, your business and your real estate investments.
Andrew will give all attendees a detailed handout of his latest research including where each state in the Wilson curve plus a lot more.
Click here now and get all the details of my National Property and Economic 1 day trainings and reserve your place.
If you had attended my seminars last year or the year before – and more importantly if you would have taken the correct action – you would now be sitting feeling pretty smug.
By the way…since we have no properties for sale, it’s always been easy to give independent unbiased facts about what’s going on.
The world is changing, our property markets are changing and we can’t wilfully ignore the changes, but for those at this event, we help you discover how to prosper in the next few years.
So please click here now to get all the details and reserve your spot and a FREE spot for a friend.
See you there.