Property cycle heads into correction phase
WHEN people talk about property invariably the conversation turns to the property cycle.
But what is the property cycle?
As REIQ Darling Downs zone chair David Snow says: “Real estate prices rise, fall, stabalise then rise again”.
A simple enough concept but there are many factors that influence the cycle and how long it takes for a complete cycle to occur.
Mr Snow said there were four key phases of a property cycle, the peak (the top of the market), ‘the correction’, which is a long slow period where prices stagnate, the value phase where prices are flat, which is often a good time to buy and the growth phase when prices begin to rise.
Quite often in the growth phase the price rise is initially slow before picking up pace.
Mr Snow said Toowoomba was currently in the beginning of the correction phase.
“It means that for a seller, the capital growth which typified the previous three years is no longer evident and if a seller is truly wishing to sell at a fair market value, they may need to change their price expectation,” Mr Snow said.
“For buyers, it means generally more time to consider the property currently available and to ascertain if the listed price is realistic or otherwise.
“Property cycles are a reality and if buyers and sellers are selling and acquiring in a similar market place and similar products, the impact in this particular phase will be minimised namely, a seller that is potentially disappointed with the resultant sale price for their home may be pleasantly surprised with their buying power when they look to acquire.”
Generally speaking a complete cycle takes between seven and 10 years.
Historically in Toowoomba values have often doubled in each full cycle, Mr Snow said.
“There are many factors that can influence the size and the length of a cycle, including the cost of borrowing money (interest), the availability of product, a buyer’s ability to afford the cost of borrowings, job security, government policy, social trends and consumer sentiment,” he said.