Property Cycles vs Property Tides

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There is a difference between Property Cycles and Property Tides and understanding the difference could make or break your investing.

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Transcription

Phil:

Hi. I'm Phil Anderson from LifeCorp, the home of street-smart property investors. As a property investor, no one wants to make it harder than it needs to be. Property growth and picking property cycles around Australia is obviously a key objective of every property investor. Today we're going to look at the difference between property cycles and what I call property tides, something that if you get it wrong can cause you a lot of pain and a lot of frustration.

What do I mean when I talk about property tides, as opposed to property cycles? I've been watching property cycles all over Australia for over twenty years, and there are hundreds of them. There are hundreds of property cycles all over the nation. The reality is when you look at the major players, and let's use Sydney and Melbourne as the two main examples. In recent years if you tracked out the growth, and Melbourne would be longer and more sustained than what the Sydney curve has been, but let's just take on Sydney today. Let's use Sydney as our example. The reality is, in the last couple years, we have seen substantial growth in the Sydney market. Many commentators would say that it's most likely that that growth, while it's predicted to still have some growth left in the market through 2015, it is due to taper off somewhat compared to what it has in the last couple of years.

In my mind, although inside the Sydney market there are dozens and dozens of cycles, experienced and high-quality property investors will still be picking the eyes out of the opportunities in the Sydney market. Whilst they'll be harder to find, the more skill you have, the more determination you have, perhaps even the more skills you have with other property models, buying and renovating and some of those other hands-on models, there could be still some room for okay performance inside of that market. In my mind, as a investor who likes to be somewhat of a lazy investor, I don't want to roll my sleeves up and get a paint scraper out and so forth. I'm too busy. I like other aspects of my life. I like holidaying and a whole other range of things, so you may think of me as being lazy, but I prefer to purely invest and let the properties do the work for me.

With that in mind, although I still think there's some growth to be had, the tide is starting to slow down. Like I said, there are dozens and dozens of property cycles within the Sydney market, and the Melbourne market, and the Brisbane market, and so forth and so on. The reality is that as that tide turns and flattens out a tiny bit, it become increasingly hard to go against the tide; the more energy that's required to get the same results. For me, I don't think of entering the market too high, entering too high and running the risk of that tide turning. Regardless of how many cycles you try to investigate and so forth, at some point if you just generalized about one whole property market, being the Sydney market, that tide will turn. Eventually you will be going against the tide, and that's no fun at all. I prefer to jump into a market right when the tide is just turning in my favour. I'd rather pick up 3 or 4 great years, 3 or 4 years of growth, 3 or 4 years of just floating with the tide. Plant my seed, jump into the market, keep the right time to enter the market, and enter with the tide.

Unfortunately, when you stay in one neighbourhood, when you think that your city or your major regional town perhaps, whatever it is, whatever market you're in, if you're just in one market, going against the tide is never fun. Unfortunately, over the years, what I have seen is that in a total length of a property cycle from let's say the peak of the last market to the peak of this market, probably 2/3 of a cycle, nothing happens. 2/3, nothing happens. 1/3, everything happens. That's when the tide turns and it works in your favour. I like to jump in and go with that 1/3. I like to jump in and go with the tide. Please consider that if you're thinking of investing in your local location. Is the tide about to turn and go in your favour, or are you running the risk of being too high in the cycle? Are you running the risk of jumping in and going, "Whoops. What happened to the tide? Now I've just got to sit here, floating along, doing nothing for 6 or 7 years, waiting for that tide to turn and come back in my favour.

I'd much prefer to be identifying markets, what I call "7 o’clock Markets," markets that are turning, tides that are turning, and that does a lot of the work for you. You may think of me as the lazy investor, and I'm okay with that, but I want to pick these stages in the cycles. I want to use the tides in my favour. The only other thing I would say is, if you're going to buy an investment property, regardless of where you go into the cycle, if you're going to buy a property, and I'd encourage you to pick 7 o’clock, if you're going to buy a property, if you can't buy it with your lunch money, don't buy it.

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