If you want to invest in property, it’s important to understand the property cycle. It has four phases:
We’ll look at each of these phases in turn.
The boom phase
The boom phase is when property prices are rising quickly. Australian property prices are currently in a boom phase. Property prices in regional areas in Australia have grown by more than 20% over the last year. They have risen by more than 20% in Australia’s capital cities. This is significantly higher than the long-term annual average.
Many factors are driving this boom phase, including:
- record low interest rates, and
- first home buyer incentives such as the New Home Guarantee, the First Home Loan Deposit Scheme and the Family Guarantee.
The upswing phase
The upswing phase is when prices are rising after a stagnant or downswing phase. In other words, it is when prices start rising again after a period where they have remained stable or declined.
Australian property prices were in the upswing phase before they entered the current boom phase.
The stagnant phase
The stagnant phase tends to follow the upswing or boom phases. It is where prices stabilise for an extended period. It’s likely that the Australian property market will enter this phase in the next few years.
The downturn phase
The downturn phase is a period where prices temporarily drop. Often it happens after prices have risen too sharply during a boom period. It is sometimes called a correction phase.
When should you buy in the property cycle?
Common sense dictates that you should buy when property prices are at their lowest. However, no one can predict how long any of the phases will last. Property prices depend on demand and supply. Properties in good locations tend to always be in short supply and high demand.
You should always:
- aim to buy in a good location. Good locations are where people want to live for work and lifestyle reasons.
- view property as a long-term investment. If you hold onto property for seven years or more, it will give you time to capitalise on any market upswings or booms.
It’s also important to be aware that different property markets within Australia can be in different phases at the same time. The demand in some areas can be higher than others. In addition, the demand for certain types of properties (e.g. houses versus apartments) can be higher than others at the same time.
How we can help
If you’re looking to invest in property, our licensed and experienced brokers at Wisebuy Investment Group can help you to find the right loan for you. We can also help you with your loan application.
We service a diverse range of clients in the popular Newcastle, Lake Macquarie and Maitland areas, and we work with more than 60 lenders in the Australian market.