But what drives the property cycle, and how can buyers and sellers capitalise on the cycle’s different phases?
A property cycle starts with a boom when prices and demand are high amid limited supply. The boom is typically followed by a downturn, which can happen due to an oversupply of properties in the market, a reduction in borrowing capacities, or a combination of factors. In this phase, prices may fall, and demand is low.
With fewer buyers in the market, prices start to level off or fall – this is known as the stagnation or stabilisation phase.
Slowly, the property market starts recovering and more investors and buyers start entering the market, which is the upturn phase that leads to the next boom: the start of a new cycle. Although it’s widely believed Australia’s property market is boom or bust the swings in prices are generally less dramatic and what you find particularly in capital cities is substantial periods of an upswing and then a contraction phase.
There are many different drivers; with population growth, interest rates, the availability of credit, tax and policy settings, health crises, big spending from the federal government on infrastructure and buyer incentives all in the mix.
One of the factors that contribute to a downturn can be the loss of borrowing power when interest rates go up or when lending standards are tightened. When prices stabilise, the Reserve Bank and economists tend to change their outlook and we hear talk of lowering rates or relaxation of lending criteria.
If the Australian dollar is low compared to other currencies, our market becomes more attractive to overseas buyers, pushing up demand for property.
The duration of each phase of a cycle can vary widely, reflecting a range of socio-economic factors, with history showing both short, sharp upswings and long, drawn-out periods of growth.
In navigating the intricacies of the property market, a buyer's agent can be an invaluable asset, providing market insights and trends, as well as strategic advice to help you make informed decisions at every phase of the property cycle.
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