There is more than one property market
While many people generalise about “the” property market there are many submarkets in every country.
To better understand property markets, investors need to be familiar and recognize property cycles or what’s sometimes referred to as the property clock.
The property market moves in cycles – just like a clock. Property values rise, markets go through a correction then rise again. The whole cycle takes around 7-10 years, (although recently commentators have adjusted this to a more conservative 10-15 years) and ideally one cycle should see property prices double in value.
Take a look at the picture attached which explains how the property cycles runs.
There are 4 main periods on the clock
- Top of the market (12 o’clock)
- The downturn (1 to 5 o’clock)
- Bottom of the market (6 o’clock)
- The upturn (7 to 11 o’clock)
Each significant area in a country is at a different stage of its property cycle and within each area the markets are segmented by geography, price points and type of property. For example, the high end of the market will perform differently to the new property market or the investor segment or the median priced established property sector. In each of these markets, various segments will perform better than others.
The key to working out what is going to be significant investment is identifying what point the area you are looking at is in its property cycle or clock.
Sometimes it can be more effective and efficient to hire someone who can help you with this.