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How long do market cycles last?

03 JUN 2020 By Cameron Micallef 4 min read Investor Strategy

While most properties will double in a decade, most of the gains will happen in two to four years with six to eight years of stagnation in between.

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Research into 150 suburbs by InvestorKit director Arjun Paliwal highlighted the importance of buyers understanding these trends to make more informed decisions.

“As a result of that people buy in locations that may not be best for them, and end up twiddling their thumbs for a long time before anything like that happens... or they sell early and get frustrated,” Mr Paliwal said.

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While highlighting the importance of time in the market, the buyer’s agent believes timing the market can be a game changer for investors.

“‘Timing’ the market is never ‘perfect’, but by getting the right timing (or as close to it as possible) as you can see from this image... can be life-changing,” Mr Paliwal said.

 
 

He also explained that unlike other asset classes, property growth is not linear. 

“Property over a 10 or 20 or a 30-year cycle can grow at 5-7 per cent p.a. (after breaking down the overall growth during that period).... however, too many seminars... spruikers... and many new investors believe that property gives 5-7 per cent p.a. chuck it in a compound calculator... and it spits out where you will be... property simply does not grow at that rate each and every year... it’s spread across booms/gradual increase/decline/flat phases of cycles,” Mr Paliwal noted.

Mr Paliwal explained that an investor who owns a property for 10 years is likely to have the following cycle: “What you will notice is that in a 10-year ownership window when a boom has occurred (not all) typically the below will occur:

Boom period: 2.5-four years

Flat/declining: two to three years

Gradual increases: three to five years.”

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