It’s been almost 20 years since writing the book ‘Grow Rich with the Property Cycle’.
So is the property cycle different this time?
I can confirm the property cycle is in fact unfolding quite differently this time.
However, that does not mean the property cycle is broken or no longer relevant.
The latest cycle is more volatile than previous cycles. That volatility has been induced by the Market Influencers of legislative amendments, inflation, and interest rates. Nevertheless, even this cycle still rhymes with previous cycles.
The current view of the property cycle has been overshadowed by the clouds of Market Influencers blocking the reality of the cycles status.
It looks different and whilst it is in some ways, in others it is not.
The ways it is different is the rapidity and magnitude of property price rises and falls.This is the direct result of Market Influencers.
The ways it is the same is the underlying state of the Key Drivers.
Key Drivers include Demographic, Financial and Emotional drivers.
Drivers such as Population growth, Incomes, Employment, GDP, Number of People Per Household, Rents, Property Sales Volumes, Property Listings, Days To Sell and more…
For some history on the Auckland property cycle click here
THE UNDERLYING CAUSE OF PROPERTY VALUE INCREASES
With 20 more years’ observation and experience, I also now have a clearer view. A clearer view of why capital growth is an absolute given when it comes to property values. Given because of our inflation-based economy.
Inflation underpins the value of new builds. That’s because they typically cost more to build tomorrow than they do to build today. This is due to the price of materials and labour rising with inflation.
However it’s not only new builds that benefit from inflation. Existing dwellings also increase in value, due to the law of relativity. Otherwise you would be able to buy older dwellings at a fraction of the price of a new build next door. You cannot.
Of course the new build may carry a price premium based on being new. It also may have a far superior fit out. However, this too would influence the value of the house next door!
An often misunderstood point is that inflation does not necessarily immediately push-up house prices. Sometimes their can be a considerable time lag before the inflationary impact is evidenced in prices.
IS THE OPINION TRUE OR MISLEADING… AND HOW WILL YOU KNOW?
Wise investors have often heard the catch cry “But this time it’s different because…”.
Usually to justify why a current boom should last longer than in previous cycles. Or should be shorter. Their cry could be true. However, it could equally be misleading. Especially if it is based on an emotional view rather than an analytical one. A view which lacks stringent analysis of the property cycle.
Yes this property cycle can look very different to previous ones. However varied things look, the basic principles of the cycle remain the same. This cycle knowledge can be used to spot ‘opportunity windows’. To increase net worth from property while minimising investment risk.
The property cycle provides many tell-tale clues. Clues that give some indication of what is likely to be in store for the property market. Sometimes several years in advance.
Now you know it’s different this time, yet the same hers where you can discover more about Why the Property Cycle Is Predictable
