Property Cycles

From: Rakesh Jain


Long ago I had read an article on economic cycles, which depicted a clock of 12 events as follows:

1. Rising Interest Rates
2. Falling Share Prices
3. Falling Commodity Prices
4. Falling Oversees Results
5. Tighter Finances
6. Falling Interest Rates
7. Increased Unemployment
8. Rising Share Prices
9. Rising Commodity Prices
10. Rising Oversees Reserves
11. Easier Finances
12. Share Market Peak

Can someone help me understand as to where exactly we are at the moment in this cycle? Does the record time low (forced) in 30 years interest rates have any impact on the apparent position of 11 (i.e. easier finances)and its validity? Also what is the duration of such cycles? Jan Somer's book 'Building Wealth thru Investment Properties' does mention this phenomenon but does not elaborate on it.

I have just woken up from a long sleep after investing in my first Investment Property 6 years ago, which was stagnant in growth for a long time, and now feel that I have missed the boat for buying another property unaware of the rising prices during last 12 months.

Is it still a good time? I am keen to understand how the variables in the clock relate to each other and am looking for some appropriate reading material.

Any help will be appreciated!!

Thanks & Regards,

Rakesh
 
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Reply: 1
From: Michael Croft


The economic clock was more obvious in the past as the time lagg for critical information to reach the decision makers were often measured in years. Micro managing an entire economy was not possible (still isn't) as the information was already old and governments were shutting the gates after the horses had bolted. Also the highly regulated domestic economy and the global economy are vastly different now versus when the simplistic theory was postulated.

In the last 15 years technology has also changed so much; computers and info gathering have improved enormously. Hence the blunt instrument which was monetary policy is now being used to fine tune economies - witness the interest rate changes in the last 2 years (was it 8 or 9?).

All the above means that even international political economists like me are having trouble working out where the hell we are in 'a cycle' at the moment. What we are seeing is a 'new world order' in more ways than one with a layering of several cycles which totally confuses the picture.

I can't help trying to figure it all out; I know I shouldn't bother and simply concentrate on the here and now. If the numbers stack up and the deal works for me I will do it no matter the cycle or economy.

I'm sure this didn't help but there you have it.

Michael Croft
 
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Reply: 1.1
From: Jim Koss


Michael,

You are correct.This did not clear it up.
But it does shed some light on an economy that is not Black & White like it used to be.

JK
 
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Reply: 1.1.1
From: J Parker


Rakesh, If you have read Jan's books, you would have realised that there is no "right" or "wrong" time to buy property, as long as it can be rented and you intend to hold onto it for the long term. Good Luck!
Cheers, Jacque :)
 
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Reply: 1.1.1.1
From: Waverly Bay


The esteemed economist John Kenneth Galbraith once said in relation to those that dare speculate on the future direction of a country's economy:

"There are those who don't know....and those who don't know they don't know"

I am incidentally a very strong believer of the thinking/strategy of yet another esteemed member of this forum:

"If the numbers stack up and the deal works for me I will do it no matter the cycle or economy."

Anyone sell their IPs cos the introduction of GST in july 2000 was going to bring about a big DOWNTURN in property prices?

Or what about the 1998 "asian financial crisis" which was meant to cause a massive glut of properties due to financially troubled asians selling out big time?

Cos if you did sell and reinvest the proceeds for better opportunities.... you would have missed the cream of cap growth for the 90's in IPs..

Maybe its too early to speculate once again on the effects of sept 11.


ok...this post is not a recommendation to buy buy buy... but if the deal stacks up in the HERE AND NOW... and with suitable risk management strategies in place, why not?



Cheers

Waverly
 
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Reply: 1.1.1.1.1
From: Dave :)


Well said Waverly - great post. Keep 'em coming.

What's the difference between today and the late 80's? About 12.5%....

Cheers,

Dave
:)

{Life's short...play hard}
 
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Reply: 1.1.1.1.1.1
From: Chris Legg


In Fred and Brett Johnson's book
"The Wealth Power of Property" they have a
Property Time Clock which shows that currently for Sydney and Melbourne we are at
five past "falling yields"

Lifes a beach at Caves

Chris
 
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