Over the past few years we have seen so much movement in the real estate market. Despite the pandemic, Australia’s housing market has boomed in 2020-21 and is now in the cooling or downturn phase of the cycle.
The property market cycle is one of the most important aspects of investing in Australia. This affects the value and price of properties, but also how quickly rates can go up and down.
There are four phases in the real estate cycle: recovery, boom, slowdown and stabilization. The real estate market cycle describes the movement of house prices through the stages.
In this article, we discuss some lessons to learn at each phase of the cycle so you can make an informed decision on when is the best time to enter or exit your investment portfolio.
Important lessons from Australian property market cycles:
- Enter the market when you can afford it, not when you feel you have to
- Interest rates can be a critical factor influencing the real estate market
- It is better to buy before the rise and sell before the price falls
- You don’t have to wait for the bottom of the market cycle to buy a property
- Each phase of the real estate cycle affects different types of properties differently
Enter the market when you can afford it, not when you feel you have to
The next time you are 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, chances are the market will change over time as more investors enter the market and start making their own decisions about when to buy or sell.
If your motivation is something else entirely, like getting out of debt or settling down with kids or grandkids (or even pets), now could be a good time for you to enter the market.
Interest rates can be a critical factor influencing the real estate market
Interest rates are a major driver of the real estate market. If you have a mortgage, interest rates will determine how much money you pay each month for your loan and also what type of house or apartment you can afford.
When interest rates rise, it means borrowers have more to repay and, therefore, less money available for other expenses. This can affect all types of goods differently depending on their location and type.
While we are in a downturn in 2022, you also need to consider the state of the economy. Besides the price of a property, keep in mind that interest rates can have a big impact on your investment. Property prices may be down, but there are concerns about rising cash rates and inflation rates, which can affect your purchasing power.
It is better to buy before the rise and sell before the price falls
The reason for this is simple: if you buy during a boom, your property may not have any capacity to improve values, and if you sell during a crisis, you will incur a loss with your property.
So, before you start, take the time to know the state of the market so that you don’t sell or buy a house 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 real estate market goes from here.
If you have the fundamental skills to identify the different phases of the real estate cycle, you can easily determine the best time to enter the market.
You don’t have to wait for the bottom of the market cycle to buy a property
The real estate market cycle in Australia is complex. It offers opportunities for investors but also presents challenges that can make it difficult to predict market developments. Don’t wait for the market to go down. Don’t wait for the market to rise or stabilize.
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) by first !
While many people wait for the bottom of a real estate cycle before buying, there is no need to wait. Remember: the real estate cycle varies for each location
Each phase of the real estate cycle affects different types of properties differently
Property buyers need to know what 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 house in a good location, you might want to consider buying now before the market starts to rally again.
If you are looking for apartments with the intention of renting them out, now may be your best bet, because as rents increase in many places, the value of your investment will also increase.
Real estate investors must consider all factors when making investment decisions. The real estate market is an important part of our economy and we must always consider all factors when making investment decisions.
It is important for investors to keep an open mind when investing in the Australian property market. Although several factors can affect the profit potential of a particular trade, it is possible to make sound investment decisions by considering them all.