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The Property Clock

Is it really possible to predict upturns and downturns in the property market?

Well, no-one can say for certain what will happen in the future, but you can make some reasonable assumptions by looking at the past.  While there are some blips, the economy has followed the same cycle for the past 85 years.

It’s a cycle that produces property booms approximately every seven years apart.  Of course, every boom has its bust, but you only have to look at how house prices have risen over the last 20 years to realize that the gains far outstrip the losses.

So what is it exactly that causes these cycles?  For the answer, take a look at the accompanying chart.  There you'll see how one economic cycle triggers another.  A boom begins with falling   Interest rates, rising share prices, rising rents and rising property prices.  A bust follows the same sequence, but in reverse: rising interest rates, falling share price and so on.

These cycles are very much related to the herd mentality of markets.  Everyone builds when everyone else is building, buys when everyone else is buying and sells when everyone else is selling.

So what conclusion can we draw from this?

For the property investor, it must be that a long term approach to property investment will produce surer returns.

 

property clock

Article from ADV1387/98

 

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