THE NEXT PROPERTY CYCLE!

Let’s talk Melbourne and Sydney.

It is unthinkable that the next boom would occur by then.

There is a great book written by Keiran Trass (sp?) on property cycles. There are 3 phases, boom, slump, recovery. Each of these three can be beginning, in the middle of, or at the end. If you haven’t read it I recommend you do, the insights on drivers vs. influences are very good.

So, FWIW, I believe Melbourne is at the end of the slump phase and poised to move into the recovery phase by 2007/8. Sydney is in the middle of the slump phase, poised to move into the end of the slump/beginning of recovery by 2007/8.

The recover phase for both cities will likely run for 2-6 years and only then will the boom start.

So the boom is at least 4, more likely 6+ years away. However money can be made in any phase of the cycle, including the recovery phase which is a great time to position yourself for the boom.

Using the definitions in that book I would go on to say that we have finished the boom and are just about at the start of the slump.

I dont think that property prices will boom again until at least 2014. By boom I mean that property prices rise by at least 10% in any given year. I personally believe we’re in for a long slump.

More importantly though is the fact that if you know what you’re doing and know your markets you can make money no matter where we are regards to boom, slump, recovery etc. It’s just that you always make more when the boom is on. The people who made the most from the last one are those who prepared for it during the previous slump and recovery.

Fast Lane- The poster formerly known as g7

Does the “boom’ cycle really hold any credibility? Are we trying to predicte the next boom because the most recent one has been so kind to us? It is some what easy to average a cycle out to every 7 years or so if you extend your calendar back far enough.
I’d like to share an example with you –
In 1982 a spectular Gold Coast beach front unit was purchased for $190K. It was held for 20 years then sold to me for $290K. I bought at auction and was kindly told by the real estate agent that I had paid to much! Now 4 years on I am about to list the property at $700k. How does this equate to boom cycles??
Isn’t it better to concentrate on good deals now than trying to crystal ball the future?

Not for me it doesn’t.

I muck in there, sniffing out good deals with my head amongst the specific details (called weeds), rather than flying up in the stratosphere, where all the expert commentators live, pontificating about markets, rates, trends.

It frustrates me how these young 25 yr old journalists writing these articles generalise and “quote” these experts, but never mention how many tens or hundreds of millions they or these experts actually personally own and manage. Being the Executive Director of some Property Group or REI organisation does not – in my book – make one an “expert”.

What you do with an individual title (in the buy / lease / sell cycle) is very much up to your own abilities. Buy right, lease it out right, and sell if you so wish…..and you’ll be miles in front of the identical ‘chap’ down the road whose simply sitting back wringing his hands thinking “Is this a good time to buy ?”

You’re both ‘in the market’, but the returns (both CG and nett yield) are vastly different.