The ripple effect!

[ffc1883_1996]

Does anyone have any past experience with the ripple effect? Perhaps you invested in Melbourne/Sydney outer suburbs at the start of this decade or in Perth outer suburbs a couple of years ago.

My understanding (hope) is that you can see it coming. It starts in, say, the CBD and forces prices upward, suburb by suburb until the wave slowly looses momentum many, many kms from the epicentre.

My real question is, which way does the ripple move when the market slows down? Can you see it coming? Does it start again at the CBD and come crashing through your suburb like a wave of reality? Or does is gradually build in an inwards direction converging on the epicentre again?

Thanks - Ben

 

[feihong]

Does anyone have any past experience with the ripple effect? Perhaps you invested in Melbourne/Sydney outer suburbs at the start of this decade or in Perth outer suburbs a couple of years ago.

My understanding (hope) is that you can see it coming. It starts in, say, the CBD and forces prices upward, suburb by suburb until the wave slowly looses momentum many, many kms from the epicentre.

My real question is, which way does the ripple move when the market slows down? Can you see it coming? Does it start again at the CBD and come crashing through your suburb like a wave of reality? Or does is gradually build in an inwards direction converging on the epicentre again?

Thanks - Ben

Hi Ben,

A very interesting topic indeed. I have never seen a recession myself, but my guess is that unlike in a bullmarket where the ripple effect is created by mass psychology (this suburb is booming, the neighbouring suburb must be booming too!), in bear market, everyone tries to hold on to their properties, and whoever sells only had to sell because they can't hold onto it anymore. Thus, there probably won't be a regular "ripple" wave across the board, rather, it will just be pockets of "slump" here and there. Of course, statistically speaking, it would be the mortgage belt suburbs that are most likely to be hit first.