Investing at the right time: Understanding property cycles

77Investing in property is an exciting prospect. While it’s important to pick the right area, picking the right time to buy could also mean the difference between a great investment and a sour one.

An understanding of the property cycle can help with your foray into commercial or residential real estate investment.

Value phase

During this phase, prices are rising slowly. The gradual growth means that some investors might take a while to cotton on to its occurrence.

Keeping an eye on suburb profiles for steady growth is one way to work out whether to invest.


Confidence increases during the boom, as do property prices.

With confidence and speculation on behalf of investors, homeowners and first home buyers, prices surge at a much greater degree than during the value phase.

It’s important to judge a purchase at this point carefully. You don’t want to miss out on a valuable investment, but it’s important to dive into the property pool before the next phase kicks in.


Buying before the peak phase hits is recommended, as this is when prices are highest.

Seek investment advice early on, so you can nab a property in a high-growth area but still flip it to make a tidy profit before prices drop.

Slump and correction

With the surge of investment and home construction, supply eventually exceeds demand.

This causes prices to drop, potentially remaining at these sub-optimal prices for a number of years.

However, the market will eventually correct, with a fresh cycle beginning and the value phase kicking in.

As an investor, your aim is to buy when the prices are low, but in an area destined for high growth. Then you can sell the property at a profit before the market slumps.

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