Property Cycle

[RedPanda]

Hi All,

I am new in this forum and this is my first post.

Does any of you know a good book on property cycles in Australia. I know about "Grow rich with property cycles" but feel that it might be more focussed on NZ. And I feel that property cycles in different countries and even different cities may not be that same. Take Sydney for example, which some people might say missed the last upswing but to me it is just that the property cycle of Sydney is different to property cycle of other cities and each city follows its own property cycle.

I would also like to know what you all feel about the stages of property cycles in different Australian cities currently.

Regards,
Roopam

 

[MichaelW]

Hi Roopam,

And welcome to the forum. That book you mentioned is actually a very good one. Have you read it yet? Kieran talks about indicators that can show you where a particular market is at in the cycle and he also spells out the appropriate investor actions depending on what part of the cycle your market is in. Although he is from NZ, the book itself is applicable to all property markets and I know from him personally that it has sold very well in the US. I just hope a few of them applied his principles before it all went crazy over there.

The Herron Todd White month in review report also has a city by city view of where each Australian city is in the property cycle. And the guys at Quartile Property Network also have some good cycle information and spell out where the eastern markets are as this is their focus.

There's a lot of good sources out there and a lot of them free. Google HTW and quartile and start reading from there. And do yourself a favour and definitely read Kieran Trass' book too.

Cheers,
Michael.

 

[Ausprop]

as the interest rates in india are likely to go up the boom in the property market is on a decline . already the softness is visible in certain markets . now you will see stagnation in the property prices for next 1 year .

seems to be a common theme. the US will really feel the pain if they ever lift rates. at least here in Oz the rates have been tightened for some time so the pain to some extent is already here. The rest will depend on the depth and extent of the recession

 

[RedPanda]

Thanks Michael for the information. Have ordered the book. (It's not available in stores in Sydney)

Just thinking aloud. Human psychology is to try an establish a system to the scheme of events to better understand things. "Property cycles" are influenced and developed by a number of factors and indicators and their combinations. Things were very different at the time of second World War than today. We only have a benefit of analysing data for 4-6 past property cycles to establish a pattern. And the combinations of factors influencing them have been different before as they are now. e.g. in almost every property clock I have come across, the slowdown is characterised by Falling Stock prices, Rising interest rate and Falling commodity prices. Well, currently, the first two are true but the third isn't.

What I am trying to say here is that it is probably not possible to establish property cycles with a lot of confidence. Else how do you explain Sydney property market which missed the Boom and Brisbane market which is almost defying and will defy the slowdown?

I think while understanding the factors and indicators and their combinations is very important, probably one shouldn't make much out of current stage of property cycle alone.

Happy to be proved wrong,
Roopam

 

[MichaelW]

Hi Roopam,

A couple of comments below...

in almost every property clock I have come across, the slowdown is characterised by Falling Stock prices, Rising interest rate and Falling commodity prices. Well, currently, the first two are true but the third isn't.

Be careful what you wish for. That last indicator might be about to fall into place. As is reported widely at the moment, the cure for high prices is high prices.

how do you explain Sydney property market which missed the Boom and Brisbane market which is almost defying and will defy the slowdown?

I think you'll find that Sydney benefited significantly from the last boom. It just topped out first after running harder than the other capitals. Brisbane and Melbourne topped out more recently. Each city moves to its own cycle, and individual property drivers within each city force suburbs or individual properties to buck the trend. Its an indicator only. But there's an old adage that a rising tide lifts all ships. Understanding the trend allows you to then optimise your investments by buying well when the trend is on your side.

I think while understanding the factors and indicators and their combinations is very important, probably one shouldn't make much out of current stage of property cycle alone.

Agree, understanding the state of the property cycle is only one piece of information you need to be aware of when making an investment decision. But it is an important one.

Cheers,
Michael.

 

[RedPanda]

Hi Michael,

I think you'll find that Sydney benefited significantly from the last boom.

To me, that's defying the property cycle. You would have expected the market in Sydney to rise based on the property cycle but it hasn't.

I think that we are trying to establish a pattern (of property cycles) using economic factors but those very factors are changing and have changed a lot. Take population growth and affordability for example. I think that these two factors alone will dictate future prises more than stages of property cycle.

Regards,
Roopam

 

[RedPanda]

OK. Just to clarify.

What I am trying to say is the property cycle exist but it is not possible to accurately predict the length of each stage of property cycle or the total length of property cycle in general.

What is more indicative of the boom or downturn are economic and demographic factors and their combinations.

Regards,
Roopam

 

[MichaelW]

To me, that's defying the property cycle. You would have expected the market in Sydney to rise based on the property cycle but it hasn't.

Hi Roopam,

OK, now you've lost me. Are you actually stating that Sydney didn't rise out of the late 90's on the back of the property cycle? The attached chart says otherwise. You'll need to clarify your point as I think its widely accepted that Sydney has boomed through the early 2000's and then peaked in 2003.

Cheers,
Michael.

 

[RedPanda]

Hi Michael,

The beauty of participating in a forum like this is that you get to know the point of view of different like-minded individuals. Of course, there are varied interpretations none of which is right or wrong.

My interpretation of the graph you attached is this.

The property market of Sydney followed a normal steady growth curve with two break-out crests and one major trough in 108 years. Can't say about the major crest in mid-1900's but maybe the crest in 2003 can be explained as a result of strong population growth (in combination with other factors) and the trough which we are facing now a result of affordability crisis. I am sorry but I cannot see 10-15 "property cycles" if they last 7-10 years, in the graph. So, the graph makes perfect sense to me even if I haven't heard of a concept of "Property Cycles".

What I am saying is that you can make a interpretation of price growth as "property cycles" but there is no way anyone can predict when and how much future growth will be on basis of those "property cycles". So they are good to look at on the hindsight but may not be as good in future predictions. I personally feel more comfortable in predicting future growth based on mere economic and demographic factors.

Cheers,
Roopam