If looking to invest, it is important to gain a fundamental understanding of the property cycle. The property cycle, whilst not set in stone, is a good indicator of where property may be heading. It is important to note, that whilst the property cycle does tend to repeat itself, different capital cities may be performing at different rates and experiencing different stages of the cycle at different times. The duration of each stage may differ as well as the difference in highs and lows.
The Property Cycle
In general the property cycle repeats itself every 7-10 years through the below stages. The completion of one stage will lead to the commencement of the next. The duration of each stage is unknown, but the following cycle is a common one in most capital cities.
The Value Stage
Generally when prices are fat and people tend to buy.
The Growth Phase
Prices begin to rise.
Prices peak at the top of the market.
Prices tend to decrease to stabilise the market. Sometimes known as a price crash, but is more a correction to the highly inflated peak prices where prices will stagnate.
There are many contributing factors to the property cycle which are also dependent upon external factors such as:
- Interest rates
- Bank mortgage restrictions
- International lending restrictions
- Vacancy rates on investments….
There are 3 key requirements to tick off before you consider investing…
- Understand the property market.
- Know where your area sits in the cycle.
- Know your own personal situation.
So Where Is Darwin Sitting?
Darwin is potentially nearing the very bottom of the market. 2018 will remain a challenging year but conditions are not expected to worsen.
- Demand is expected to remain steady in houses with further decreases in units.
- New supply is expected to remain low which is a good sign for the market to absorb excess stock.
- Prices may fall further due to interstate-migration and a weakening labour market.
- Vacancy rates on rentals are a risk with the rental market staying a tenant’s market for now.
Wherever the market is sitting, always consider your own personal situation before looking to invest. The market is one thing, but it needs to match your own personal financial situation and motivation for investing.