THE PROPERTY CYCLE – PROFIT BY PREPARATION
For many people wealth is tied up in property after experiencing a cycle of extraordinary house price growth.
Have you ever heard this statement “Property values double every 10 years”!
Looking back over past few property cycles and in properly analysing the “Boom & Busts”’, well located properties in key regions had prices doubled on average every 7-10 years, but this did not happen in a straight line and DID NOT happen every time!
Some years experienced double digit growth and there were other periods when the market was flat on its back or falling.
The property cycle goes through a few phases.
Each system is interlinked with the banking, mortgage and business cycles!
Over the past 22 years we have seen a a lot of global and national events that have moved the housing market. From interest rate cuts, investors liquidating holdings, change in legislation but mainly the correlation between property investment and economical indicators that largely depends on key factors like GDP, unemployment, and income growth.
Please see an illustration of the trend and the forecast of the short term future.
CLICK IMAGE TO OPEN :
This illustration highlights some correlation in the key economical events and the timing of each phase within the cycles.
Some events that are obvious are the housing crash in the late 1980s, the boom and bust at the turn of the millennium and the change in the Bank of England interest rates. (Read More Here)
What are the signals?
“Smart money” can identify these trends and begin to purchase property in the preparation phase of the new cycle, as time continues novice investors will notice become aware of the market climate and the enthusiasm towards investing and the consecutive change in house prices.
At the point where house prices received media attention and the population is captured by the noise overall confidence toward prices, the argument of supply and demand comes in to play.
At this point there is a very small window left to purchase property to see the benefits of being in the boom phase.
Where are we now?
With the average house price at £219,000, we are exactly in the centre of the support level for UK house prices, some economist forecast that the average UK house price will be at £300,000 by 2025. (Read More Here)
With confidence making a comeback, property investors are showing EXTREME responsiveness to record low interest rates.The Bank of England voted to keep the Bank Rate at a record low of 0.25 percent on August 3rd, 2017
Gross yield are up! Especially with a number of attractive fixed rate finance options available, meaning investors are responding much quicker to these conditions than owner occupiers.
Over the past 2 years more and more accidental landlords are taking the upturn as a chance to sell existing stock pointing to a further recovery in the housing market.
There is still time!
The signal for the masses has not yet happened, so consider purchasing whilst we are still in the preparation stage of the new cycle.