Property Clock, Property Cycle, Market Trends – do they mean anything and if so, how do we make sense of them?
These are questions I get asked on a weekly basis. It seems the topic of market cycles and property clocks is top of the list in the minds of property investors looking for a way to ‘pick’ the market timing.
The first thing to note is that there is a big difference between trading, investing and transacting. Transacting takes an approach that looks for a longer-term outcome. Trading sees a deal, buys it with the view of a quick flip to make some money on the back of market movements. Transacting is the art of following market cycles and using them to your advantage.
We don’t help clients with property trading, that is simply not our area of expertise.
The difference between trading, transacting and investing needs to be considered when talking about property cycles, clocks and market movements, if such things exist?
It is my belief after many years of research on this topic for myself and our clients, property cycles do happen, but do not happen the way that is commonly promoted.
Here are my 7 key points around clocks, cycles and markets
1 – Property does not double every 7 years
You have probably heard this one, every 7 – 10 years property doubles. Well it is simply not the case. This concept was thought up by property spruikers with an agenda to separate you from your cash via the purchase of one of their overpriced new properties.
2 – We have more than one property market
Media outlets talk about the Australian property market as if it is one market. It isn’t. At the present time (end 2018) Sydney is cooling, Melbourne following, Brisbane is performing well (probably has another 12 – 18 months to run) Perth is in the basement (should be a good long term buy) and there are bunch of regional towns and other capital cities that are all in their own market position.
3 – There are many different property clocks
It seems that everyone with Photoshop has created some form of property clock. From waves to hands on a face to 4 boxes joined together, there are heaps to choose from. A property clock is simply an ‘easy’ way to try and show a complicated thing, markets. Some clocks are good, some are not worth their time…
4 – Property follows a cycle
Yes, I firmly believe that property does follow a cycle. It is not a date based cycle but rather a process of time based events that form the cycle. This means that events transpiring usually follow events they have followed before and precede events they have preceded before. Really it is a series of repeating events that form the market actions and over time this makes a full cycle.
(Click here if you want to know more about how we came to this conclusion and see the specific property clock we use.)
5 – Timing the market is harder than Time-In the market
It is always easier to have better results on your buy and hold property, the longer you are in the market. There are some exceptions to this but we are talking averages here. It is much harder to time the market as that once again comes close to a trading mindset. However if you know your cycles and have researched your area, you can act with much more confidence. Perhaps the best thing about having a decent idea about cycles, is knowing when NOT to act.
Timing the market like a stock trader is never going to work in the property space. However, knowing the property cycle timing, will make you a lot of money.
6 – Re-financed loans to support lifestyle does not end well
Back in the early 2000’s the property market was surging and lots of wealth creators and mortgage brokers were selling the concept of buying 10 houses and refinancing one house per year (till you die) and retire early on the money from the refinancing. There are so many things wrong with this model and while refinancing is not a bad strategy at all, refinancing to support your lifestyle is. Your goal should be to accumulate assets, but end up with no debt, not an infinite process of gaining more and more debt.
7 – You need more than a buy a hold strategy to build reliable wealth
Now we get to crunch time. I am sure you have heard that the top echelon of wealthy people have a large portion of their wealth in property. Spruikers and others will tell you that rich people’s secret to wealth is property, so you should buy some too.
Let me bust their bubble. Rich people have property because the majority of them made their money in business and have parked their wealth in property. The exceptions are people who made property, their business.
If you want to act like a ‘rich’ person, a buy and hold strategy is not going to cut it. Property is a great place to park your wealth, however if you want to create it, then get good at business, shares or the business of property.
(The business of Property is better known as property development, renovations, flipping etc. Just about anything other than buy and hold / set and forget strategy.)
There are my 7 tips on Property Cycles, Property Clocks and Market Trends, that go against the mainstream message often spread by people with an agenda.
In fact, myself and the team at Real Property Advice feel so strongly about these 7 tips, we have created a new way for our clients to profit from transacting this way, in 2019.
Keen an eye out for the release of this exciting concept in February next year.
For more information on this article or anything property related, contact us via 1300 66 77 89 or via email here.
Since 2004 Scott Northcott has been helping people buy the best properties for their needs at prices that simply speak for themselves.
Scott has been instrumental in bridging the gap between financial planning and traditional real estate transactions through his property advice model. 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.