The property market is subject to cycles of activity! The term property cycle refers to the time it takes a property to double in value.
Assuming a 7 Year property cycle; expect a time of no growth followed by a time of of little growth (totalling about 5 years). Depending on how far prices rose during the previous 2 boom years; the first 2 years of the new cycle may even see a softening or correction of prices from off the back of the high point in the last boom.
Game, Set and Match
While external factors, like the economy and consumer sentiment etc will artificially drive property prices up or down for a time; the law of supply and demand will be the final jury. Water will always find it’s own level.
To win a tennis match you must first win more sets than your opponent. Just because you lose a game or two it does not mean you will lose the match. In fact winning is often more about being mentally tough and being able to turn around a losing momentum.
So it is with property. An investor following a buy & hold strategy; such as the mrd set ‘n’ forget for busy people method of wealth creation will win his or her match!
Why?
Because persevering through a complete property cycle pretty well guarantees a generous capital gain (assuming the price of the initial purchase was fair, the location favourable and it’s a residential property).
Having a bad experience with a property manager or going without something because the last rate notice came through at a terrible time… is like losing a game. That’s ok, however, because if you just “keep playing”… the match has been rigged in your favour!
Stupid Things To Avoid In Property Market Cycles
- Deferring a property purchase until the market has almost peaked
- Selling a property when the market value for it has bottomed out
Clever Things To In Property Market Cycles
- Have all your properties revalued and your lines of credit set up against their increased valued when the market has almost peaked
- Look for buying opportunities when the market has bottomed out
Sound Fundamentals
The best indicator of sound fundamentals is the differential between permanent population growth and the supply of new property. I say permanent because transient population growth is by its definition unsustainable in the long term. Mining towns in recent history enjoyed increasing record metal prices… and thus mine expansion. This increase in demand pushed property levels upwards in boom proportions… but the population growth is transient. Metal prices are now retreating, mines contracting, tenants are leaving town, rents are dropping and housing values falling.
Gold Coast Property
Queensland’s Gold Coast is an area with sound fundamentals. Besides favourable infrastructure and lifestyle options, each year the net migration into the Gold Coast is between 13,000 and 15,000… and they all demand immediate housing!
Based upon an average household occupancy of 2.6 (2004, Gold Coast Bulletin) between 96 & 111 new homes are required EACH WEEK to service the population increase alone. I might add that nothing near this amount of development was coming onto the Gold Coast market prior to the global downturn; now with developers either out of business, scared to build now or just unable to secure bank funding… it will be a long, long time before the housing shortage problem can begin to be addressed.
In light of such strong fundamentals underpinning Gold Coast property it’s hard to miss the opportunity glaring at you… especially in the current climate where we have been able to negotiate some great incentives from the developers on behalf of our clients.
There are a number of markets that we have identified as being ideal, for one reason or another. It makes sense to secure an investment purchase now… much the same way as it does shopping in the post Christmas sales.
Finance Structure & Cash Flow Health Check
Our recent offer to complete a complimentary, no obligation Finance Structure & Cash Flow Health Check has been widely taken up. If you would like us to undertake this same service on your behalf please click the link below to send us your contact details.
Yes please; I would appreciate a complimentary Financial Health Check
Happy Investing,
Nick Lockhart
mrd Customer Care Program… because investing is personal
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