Submitted by: Jerryson ANYAWOE
Cycles in Real Estate Market
Phases of Property Cycles:
• Recovery: Market stabilizes and real estate prices rise after a downturn.
• Expansion: Rising demand leads to increased real estate costs and building activities.
• Hyper Supply: Extended era of excessive building and real estate overstock.
• Downturn in property values due to a fall in demand.
• Recession: Extended period of economic hardship impacting the real estate market.
Principal Motivators:
• Economic Factors: Influenced by inflation, interest rates, GDP growth, and employment rates.
• Demographics: Influenced by age demographics, migration trends, and population growth.
• Market Sentiment: Influenced by speculation, risk perceptions, and investor confidence.
Principal Accelerators:
• Financial variables: GDP expansion, labour force participation, interest rates, and inflation
affect real estate cycles.
Effect on Property Values:
• Properties typically boost in value during expansion stage.
• Property values can drop during downturns.
• Property values gradually rise during recovery phases.
Investment Strategies:
• Buy and Hold: During recessions, investors purchase real estate for potential long-term growth.
• Flipping: Buying cheap houses to sell quickly during a market upturn.
• Cash Flow: Investing with an eye towards rental income at every stage of the cycle.
Threats and Difficulties:
• Market Timing: Accurately estimating when real estate cycles will occur is difficult.
• Policy Changes: Changes in regulations, interest rates, and government policies impact cycles.
• Extended Trends: Real estate often appreciates over time.
Strategic Planning:
• Investors should implement plans that fit the current stage of the real estate cycle.
• Diversification and risk management are essential.
Real Estate Investing Decision-Making
• Understanding property cycles is crucial.
• Cycles offer opportunities for adapting strategies.
• Challenges arise from these cycles.
• Prosperous investors monitor market developments and adjust strategies.