Not the end of the cycle, not the beginning of a new one, just the middle…
It is fair to say most people would agree, that since 2019 we have been in a down or sideways market.
What we have just experienced, is in fact, a Mid Cycle Slowdown (MCS), not an End of Cycle Crash (ECC).
Never heard the term, Mid Cycle Slowdown?
More of us are familiar with the End Cycle Crash, but a Mid Cycle Slowdown is the part of the property cycle that joins the first and second ‘halves’ of a full cycle.
In last week’s scribbles I talked about the massive demand on rentals and what this means for both rents and home values. I also gave you the links to the articles I have previously written on the property cycle and the relevant dates.
What does the cycle say about this coming year?
After finishing the first half of this property cycle, the next stage was the mid-cycle slowdown, which we entered in end 2019 through 2020.
After the 12-18 months of MCS, the second stage of the property cycle is due to run its course.
In this second half, more emotion is at play. We will see emotion from buyers and sellers and also from regulators and lawmakers. This will translate to ‘looser’ lending criteria and more stimulus from the powers that be, and overzealous activity from the punters.
I am not just referring to investors either. Owner occupiers have a large tendency to operate in the Fear of Missing Out (FOMO) mindset and act emotionally when they have the financial ability to do so.
Goodbye MCS, Hello second wind
I think it is fair to say that we are towards the end or have exited out of the Mid Cycle Slowdown. This means, time for emotion and hype to rule the airwaves and activities of the property market is nigh.
Without a doubt, we have just seen more stimulus thrown at the Australian people (including property markets) than we have ever seen before.
Between government grants, stimulus, job keeping and seeking, low interest rates and massive infrastructure spending, we are on track to see asset prices skyrocket beyond anything we thought possible in past times.
What does this mean for you?
Asset prices (read property) will receive large and beneficial impact from these government and market activities, both via economic rent and inflationary responses.
Meaning, the amount of dollars in the system are increasing, so prices go up (inflation) and massive government spending (public purse) in key areas will impact home/property values (private purse) in those areas dramatically.
If you want a triple whammy for your property investing, look at where government is spending on infrastructure, what locations in those areas are ripe for demand and then ride the inflation wave.
When emotions are high, intelligence is low.
As you can see from the above, all this hype and news about spending, the economic conditions after the Corona event, the activities in the residential property market, make for more and more emotional decisions spurred on by FOMO.
Relaxed lending criteria, lower interest rates, resources boom 2.0, commodities in demand, exodus from the cities to regions (larger dwellings, more land) working from home technologies and abilities, all come together to make for a very interesting few years in the property markets.
If you are going to do something, don’t wait for your personal invitation.
Its not all rainbows and unicorns
Be very careful in this time. There is great money to be made riding the wave upwards towards 2025/26, but don’t get left holding the bag.
Just ask last week’s investors of GameStop how that feels..
If you want more information about buying property, developing property, need strategic advice or our buyers agency service, then contact us here or call now on 1300 66 77 89.
Since 2004, Scotty North has been helping people buy the best properties for their needs at prices that simply speak for themselves.
Scotty has been instrumental in bridging the gap between financial planning and traditional real estate transactions through his property advice model.
Scotty North is a Qualified Property Investment Advisor (QPIA), with accreditation’s in financial planning, mortgage broking and real estate.
By carefully considering his clients’ goals and planning for market changes via demographics and trends, Scott designs a future proof outcome not only specific to the client’s needs but dynamic in its execution with performance indicators and exit strategies built in.