The Property Market Moves in Cycles
The Australian property market has a cycle of four distinct phases it moves through. Understanding these cycles is the key to purchasing a home at the right time. These phases don’t really depend on time, rather they depend on a variety of socioeconomic factors. The cycle essentially operates like this:
- Population growth creates a demand for real estate.
- Property values increase because of supply and demand.
- Builders start building new property to meet the increase in demand.
- Too many houses are built, resulting in more supply than is needed. As a result, housing prices drop.
A Brief Look at the Phases of the Property Cycle
There are four basic phases of the property cycle:
- Boom Phase: this is the shortest phase, where real estate prices tend to rapidly increase
- Downturn Phase: this is characterised by an oversupply of properties, resulting in increased vacancies and decreased prices. This phase can last for a few years.
- Stabilisation Phase: this is when the property market tends to balance itself out due to lower interest rates. People are buying and selling houses at the same rate, causing prices to remain stagnant before starting to increase slowly.
- Upturn Phase: this is the phase when demand starts to increase. As a result, vacancy starts to decrease, rent starts to increase, and property values begin to rise. This stage can last three to four years, and at the beginning, property is usually affordable, making it the best time to purchase a home.
At Mortgage House, we understand the phases of the property cycle. We can work with you to find the right time for you to buy a home. When you do buy a home, we can also work with you to find the perfect home loan for you.