Probably one of the most common questions I get from subscribers, is “how far will my property price drop in the downturn at the end of the cycle.”
Obviously where the property is - the suburbs, states, regions – and what type of property you hold (apartment, townhouse, suburban house etc) matters.
But so too does the amount of stock that hits the market at the time of the collapse! And, importantly, it differs by region.
And what of rents?
If you’re holding onto an investment property into the next cycle, and need to generate income, will you be able to rent it through the period?
It was a question I addressed somewhat in last week’s post regarding NDIS dwellings. If you didn’t catch that report, you can read it here.
One of the keys to maximising wealth creation is picking areas that are not at risk of being oversupplied in either a boom, or a bust!
High vacancy rates are a classic indicator of the above. They highlight the markets where prices are likely to stagnate or fall in the near term.
You’ll recall that Dr Homer Hoyt (1895-1984), one of the first to identify the 18-year land cycle watched vacancy rates, and rents, very closely.
In his classic One Hundred Years of Land Values in Chicago (1833–1933), published in December 1933, he uncovered five major real estate cycles. These peaked and crashed in 1837, 1857, 1873, 1893, and 1926–29.