Understanding property market cycles for smart investment choices
real estate market, individuals need to understand the various cycles that occur in the property market to make informed decisions about property investments. Before exploring the details of such cycles, it's essential to first comprehend what the term 'property cycle' actually means.
Property cycle is a term used by real estate professionals to describe the process of buying, holding, or selling property.
It is a fundamental tool for forecasting the best times to invest in property, as it provides a reliable framework for evaluating potential returns. The property cycle is composed of four distinct phases: Recovery, Expansion, Growth, and Recession.
Recently the average length of each phase has been reduced as velocity in economies has accelerated tremendously.
Let’s understand each of the four cycles in detail and some of the investment strategies that can be implemented based on what phase one is: -
Recovery: — The real estate cycle kicks off with the recovery stage. At this point, most of the country is still recovering from a recent economic downturn, and the property market is starting from a low point following the recession. During this phase, rental growth is minimal, and new construction projects are scarce.
It's a critical stage where investors should be vigilant for signs of recovery. While there is some risk associated with property investments, prices are relatively low compared to market value, offering the potential for a high return on investment through rental income or resale
Expansion: — Following the recovery phase, we enter the expansion stage, characterized by robust economic growth and restored confidence in the economy. At this point, both individual renters and homebuyers drive demand in the
