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WHAT IS NORMAL WITH PROPERTY MARKETS?
I overheard a couple last week discussing the property market in Sydney and one said “ I hear that the property market will be back to Normal” by about 2010.
Then this week one of my clients from the UK,was staying with us and she made the same comment to us.
“Do you know that we are told that the property market will be back to normal in UK by 2010”
SO WHAT IS NORMAL??
Actually whatever is the current situation is that is NORMAL.
The thing that people rarely understand is that NORMAL IS WHATVER THE SITUATION IS AT ANY GIVEN TIME.
Property is cyclical. Always has been and probably always will be. So the key is to be able to identify at what part of the cycle each region or area is in. One thing anyone can count on is that IT WILL KEEP CHANGING AND never be stagnant
The cycle will be at either
UPTREND, PEAK, DOWNTURN OR CORRECTION
Let’s look at Sydney
It had a boom, then downturn and now is correcting in 2008
THIS IS NORMAL
Let’s Look at Melbourne
It reached its peak in 2003 then had a slowdown and is up trending again
THIS IS NORMAL
Let’s look at Hobart
Hobart prices increased more than usual a few years ago with the Melbourne retirees selling up and moving to Tasmania and buying huge properties for a song and then having cash to spare.
After a few years they found it was too quiet then started to head back to the mainland
Now the market is in slowdown
THIS IS NORMAL
Let’s look at Adelaide and Perth
Whilst Australia has a history of property cycles averaging between 7 and 10 years from one peak to the other, Adelaide and Perth historically were between 12 and 15 years
Due to the resources and mining boom in Perth that changed this last cycle and with the South Australian Government helping migrants who were short of points elsewhere that had a spin off affect on property prices. Adelaide is now reaching Peak and has started its downturn
THIS IS NORMAL
Perth hit its peak during 2007 and has suffered for the last year with changing market conditions Sadly though many wont know that the correction has started and will still buy there thinking that it is the right time to do so due to all the hype over the past few years.
In fact it is now gone from peak to downturn
THIS IS NORMAL
Let’s look at Brisbane
On going huge population growth continues to keep the market in Queensland buoyant as more demand than supply will always keep prices up. Prices have increased over the past 6 years and now it is in “doubters” period where people are wondering if it is sustainable
THIS IS NORMAL
Having studied property markets since 1970 I am convinced that the key to successful property purchase is understanding the TIMING and know what the demand is but then what is the genuine supply over the next few years.
Of course property will work long term in most instances. However, if one is to put some money into a property today why wait for years for that money to increase when it can happen in a short period of time given the right timing in another area.
Every cycle that I have witnessed similar outcomes occur
People who don’t normally buy property for investment get caught up in the hype and go into the property market. They are delighted with the way the property prices increase and that drives them to go into another one then another one and so on. It is so easy to do when prices are going up and everyone is talking it up.
However then the downturn starts and that catches these people by surprise. Having never known previous property patterns this becomes a matter of concern to them. In many instances panic sets in and they start to sell before prices fall more, not realizing that they are in fact fuelling the property downturn with this action.
Real estate agents send out flyers to them suggesting they list their property NOW before it is too late. This is a common method of getting listings with general real estate agents. This then causes more panic and throwing loads more properties on the market than there is demand for.
Rather than just sit back and wait the unsuspecting investors not having the experience allow themselves to be coerced into this action.
People get caught out as they buy when markets are peaking due to all the news and hype
Also they don’t buy into areas when they are up trending as again they have heard the stories of how property prices in that area have fallen over the past few years.
What they do not know is that this is no longer the case in that area. Yes the market did hit bottom in that area but now there is movement again and it is actually now good time to buy in again
The movement in the market place such as this is NORMAL
Newspapers have short memories when it comes to reporting property markets as each cycle they repeat the same thing and cause panic and mayhem when but for a little research they would find that actually history does repeat itself.
Sure the factors causing the change may differ such as this time around the financial crisis in the USA is having an effect on property in most countries. The high cost of petrol contributed to the interest rate rises where in fact they only made things worse and thankfully they have started reducing them again.
WHAT IS NORMAL THEN??
Property markets will Go up, Come down and then Correct
Go up, Come down and then Correct - THIS IS NORMAL
