Boom. Slump. Recession. Recovery. This tends to be the pattern on the property clock – a pattern that is cyclical and predictable. If you’re a savvy investor you can learn to read the time on the clock and use it to your advantage!
BOOM is at 12 – this is not the time to be buying, but it’s is a great time to sell. Indications of a property boom include interest from the media and rampant growth for three years in a row. Otherwise known as market peak, this is the ceiling on market growth within any normal cycle. Its length is roughly six months. 12 o’clock is the peak of the market, and that’s when you want to sell. This is not the time to buy.
SLUMP comes in at 3 - where the market has slowed. A good sign that a market is slumping is when values slow by 5–10%. This period normally lasts about a year; however, at this point many people tend to be in denial about the market’s viability.
RECESSION of the market is at 6 o’clock – a great time to buy! This time on the property clock is often referred to as an ‘opportunity market’ as it is easy to buy at a discount from panicked sellers. When a market has hit rock bottom, it will be sitting still. There will be a small volume of sales and lots of great opportunities to achieve discounts from desperate vendors. This represents a great time to buy, and for those investors willing to gamble that the bottom really has arrived, it’s possible to achieve amazing results. However, as investors, we try to catch the market as it’s starting to rise, coming off the bottom.
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Recovery is at 8 o’clock – the best time to buy for most investors. Often in a rising market valuers are still looking to the past for data and will value the houses even lower, and because the market is rising, you can realise your profit a lot faster. Once the market has achieved its first 5–10% growth in the first year, we know this is a great time to buy.
What are the worst things you can do in a booming market?
If you’re canny and experienced you can make money no matter what the market is doing, but investors will always make more by running counter to the cycle. The worst thing you can do is buy a property in a booming market - You are too late. You will suffer as soon as that little hand swings past the 1 on the clock. Wait it out. The market will fall again, and then is the time to buy.
What are the worst things you can do in a slumping market?
The worst you can do is panic and sell your property at a loss. Wait it out until the next cycle. It’s wise to prepare for the downtimes by allocating funds to and emergency fund to cover any slumps in the market. That way you can still cover any shortfalls adequately, to get you through the slump to the recovery period. We recommend you always sell in a booming market to maximise your results.
Generally speaking, the Australian market is doing well by world standards. This is evident by:
- Chronic undersupply
- Tight rental markets and growing returns
- Immigration and the emergence of a fast-growing population
- High home-ownership aspiration for all Australians, which is still achievable
- High-income financial society with a cultural prestige to be in property
- Investor magnet for yields and growth locally and internationally, particularly with Asian buyers
- Bricks-and-mortar security, and safe for investment (proved during the GFC)
- Preferential tax treatment through gearing
- Australia has a prudential financial environment and AAA banking
- Emergence of SMSF is putting pressure on supply and creating a new demand
Understanding where the market cycle is should be in every investor’s checklist. At Focus Property Wealth we have a deep understanding of the property clock and are here to help you get the most out of your property investments. We know that A-class buyers buy at the bottom of the market. B-class buyers buy in a rising market and C-class buyers buy at the top of the market. The A-class buyers sell to the C-class buyers, and the C-class buyers take the 12 o’clock to 5 o’clock loss in the market.
What type of buyer are you?
According to a Herron Todd White report, Perth is now sitting at approximately 5pm on the property clock, meaning that you should be considering purchasing soon. 5-7 o’clock is that magic time, when everyone is thinking that the market is hopeless and nothing is selling. We get to 6pm and those who don’t know panic and sell but the astute invest and make good money.
No matter what the market is doing, you can make money in real estate. As investors you should pinpoint where you are in the cycle, to help predict what will happen next, for a better and well-planned, outcome. Focus Property Wealth will guide you every step of the way on your property investment journey.
Focus Property Wealth are here to take the stress out of property investment. Our experienced and professional staff will keep you informed of the time on the property market clock. We do the legwork for you – providing the right type of research, financial planning, goal setting and advice to put you in the best position to get optimum returns on your investments.
Book a FREE no obligation consultation or call us today on (08) 6162 6577