Five must-knows on the property cycle
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If one investment stands out in the minds of Australians as having withstood the test of time it's property. But like with any investment, timing your property purchase can be the difference between a good or bad investment: the real money's made when you buy, not when you sell.
To get it right, you need to understand investment cycles. Below of my five tips for building your knowledge.
- Irrespective of the amount being invested, always follow a due diligence process. A big mistake investors often make is failing to do adequate research. While you may not hear about people going broke in property, it does occur through being overexposed and/or investing at the wrong time.
- Availability of credit is one of the big factors impacting property cycles.Get to know the signs to watch out for:
- Easy credit: Prior to the GFC first home owners were over leveraging by building big homes with all the bells and whistles, all with no deposit. This means a correction is near and there is no protection if your timing is wrong.
- Tightened credit: Banks having to meet much tighter regulations always repeats around the bottom of the cycle. One recent change has been much tighter scrutiny applied to those over 50 and their ability to service debt.
- Release of government land. The release of large parcels of land by governments to developers at different times in the cycle fuels the boom/bust cycles. Get to know when this is occuring.
- Building significant infrastructure. Building infrastructure benefits locals and developers who then can control the release of land to control prices. Find out where the money is being spent as good growth typically follows.
- There are cycles within cycles. Each state and even particular suburbs within each state in Australia can have a different cycle. One example being Melbourne prices have stabilised while large parts of Queensland have experienced massive corrections.