Understanding the Property Cycle When Buying

Property investment is often described as the steadiest and most valuable investment as property values rise due to strong market growth. However, not many people talk about the decline during certain phases of the cycle which is worth to know. This article describes the  property market cycle. The cycle will give information about how the investment plot will be going to help investors make the right decision at different times. In fact, there are four phases that someone may need to know.

1. The Boom Phase

This is the phase where price increases at a rapid rate which results on properties selling for more than their asking price as the competition among buyers are luster that makes home owners keep pushing up their sell prices.

The trends will end up when many investors and developers and builders joining the market at the same time which leads to a supply surplus.

2. The Slump Phase

Slump Phase is the result of boom phase as it occurs as a result of oversupply of property due to the activity of builders/developers. Because of the many vacant properties on the market, it makes rental returns begin to decrease. Many home buyers find themselves distressed as they struggle with repayments. This happens because purchasers of properties sometimes force themselves to exceed their limits in buying properties in the boom phase and could not afford its repayments in slump phase (especially when there are less renters). Therefore, in this phase many people sell their property at depressed prices as it is the only way to relieve their financial stress.

3. The Stabilization Phase

The stabilization market occurs as a short phase exists in which various economic factors catch up with each other or in other words the demand and the availability do not have big gap. There is no distress among home buyers to do their repayments and the price competition is also stable.

4. The Upturn Phase

It is the phase where vacancy rates slowly fall while rents, property values, and investment opportunities start to rise. The increasing of property values will begin from the inner suburbs, or those close to the beach and then move to the middle ring of suburbs and finally to the outer suburbs. This pattern can be useful for property investors who want to have property investment prediction. Moreover, in the middle of the upturn phrase property is typically affordable and returns from property investment are favorable.

After this phase the cycle begins to start again. As the attractive market summons investors and first home buyers interest, then resulting in pushing the market towards the next boom, phase.


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