How to navigate the property clock

The more astute investors understand that there are many property cycles that effect different types of assets and run for different lengths of time as well. It’s important for investors to understand where individual properties fall on the property cycle and which micro events have the most impact on the cycle.

Aside from micro circumstances, like a new store opening across the street, there are macro events that can affect properties within the cycle as well. Many investors use the clock as a smaller proponent of their investment and research model that helps to provide clarity on broad market dynamics. Some investors monitor specific regions and follow the median price growth data each quarter and insert it into a table or a graph. Understanding each stop in the property cycle clock will help investors anticipate how the market is developing as real-time events occur.

Here is a general idea of how each tick works on the clock:

•    12:00 -- The top of the market; prices are increasing at this point. The market is undersupplied

•    1:00 – Rental returns are lower

•    2:00 – There is a surplus of properties for sale

•    3:00 – Increasing interest rates; the market is evenly supplied

•    4:00 – The rate of property sales is declining

•    5:00 – The rate of construction for new dwellings is declining

•    6:00 – The bottom of the market, prices are declining; the market is oversupplied

•    7:00 – Rental returns are improving

•    8:00 – Demands outpace the properties that are available

•    9:00 – Interest rates are declining; supply is tight

•    10:00 – Rate of property sales are improving

•    11:00 – Construction of new dwellings increases

The property cycle can help astute investors decide if there are opportunities available on the horizon when reviewing the developments in the broad market. There are software platforms and simple mobile apps to help investors review different property cycles and investment queries on the go. Many professionals believe that some of the primary catalysts effecting major markets are job creation, supply and demand and local confidence as well. Many investors spend the majority of their efforts trying to identify the bottom of the clock.

It’s important to remember that the direction in which assets travel on the clock only partially depends on broad market developments and conditions.

About Grant Muddle

Grant Muddle is the Managing Director of Malyshka Pty Ltd, a property development group with a twist. Educating investors into the ways of building financial success via property development, and acquiring properties at near developer cost, giving them instant "profit" (via equity).

Grant has a Bachelor of Accounting and an MBA in Strategic Management and brings with him development experience from Australia, India and the United Arab Emirates as well as a passion to help investors make the transition from investor to developer with ease.