Twice a year, we adjust our clocks.
Once a day, the earth spins around, and in a year, we all complete a circuit around the sun.
Our own lifecycle, from conception until death, in roughly 15-20 year increments, cycles between one focus, to another: From ‘Me’ (single) to ‘Us’ (finding a partner) to ‘They’ (having children), to ‘Us’ (empty nesters), and finally, to ‘Me’ again…and then we die.
Our physical, and mental health too, has natural cycles also. Sometimes we’re fat, sometimes we’re sad, sometimes we’re killing it at life, and sometimes we’re barely hanging on.
Day always follows night though, and that’s not just a statement of hope, it’s just pointing out a cycle.
With celestial bodies and our own bodies– cycles exist.
For those looking to keep up with the Joneses or leave them well behind, predictable cycles provide us an opportunity. How?
Our investments go through cycles, too. This means that there may be a few consecutive years of a price slump in the markets, followed by a ‘recovery’ phase, which then flicks over to a boom phase (which yes, can occasionally get interrupted by significant events, like pandemics).
The frequency, or the distance between the highs or the lows in each cycle, can be unique with each investment type, or asset class.
Bitcoin has 4-year cycle,
a diversified share portfolio might follow a 7-year cycle and,
arguable with property, there could be a 10-year cycle.
Some may wish to quibble about the exact lengths or the dates, but the fact is, some asset classes follow a slower cycle than other, like property.
This affords the everyday investor acting according to strategy and not ruled by emotion, an honest opportunity to jump ahead by knowing the property cycle.
Should you take advantage of a property cycle?
The way my wife and I built our property portfolio involved buying during the recovery phases of the property market. Our general rule at the time was to not buy anything unless we could afford to hang on to it during the slump. It worked. I can’t take too much credit however, because while I knew about the property cycle early on, each property we bought also happened to be the right time for us as a family, to make a move.
So if I may, allow me to give a message of hope and encouragement to the first home buyer, the investor, and the upgrader.
Building up a 10%-20% deposit is going to be one of the hardest things you’ll do, but for the first home buyer, stay laser-eyed on that objective, and don’t be afraid to make sacrifices. It’s about getting into the market, but it’s training for the real world too. The financial discipline required to get to this point is going to be required more than once in your life, and I’m speaking from personal, not just professional experience. An overseas trip can wait, or another car isn’t that essential. Even the low point in the next property cycle may be higher than where we’re at now – don’t wait for all your friends to be doing this, because that’s the heard calling you. Remember, interest rates are on their way down, and most likely, your income will increase over time. If you’ve decided that buying a home is a good idea, and you’ve been waiting for a good time to buy and, now’s pretty good. Don’t panic of course, but don’t wait too long either.
Property investors or those aspiring to be one. Double-digit growth will happen again. Yes, there are ‘tools’ that central banks and government will pull out again to punish those trying to get ahead, but remember: Nothing has structurally changed with the reasons why property investment will work. Property is inextricably linked to new credit creation, which, like immigration, is used to create the productivity our economy often fails to deliver. In other words, every time people borrow to buy property, there’s more dollars running around competing for a limited supply of housing. Even if you own just one investment property outside of your main home, don’t underestimate the power of hanging on just a little longer bit than the majority can.
And finally to the upgrader – the brave couple with reliable income and a good amount of equity already in a home you own already. If you’re able to buy a better home now, without selling the current home, this can be a phenomenal technique to get further, faster. It’s risky, and you’ll need a strong income and a clear goal to go down this path, but from experience, it’s worth it. It’ll take longer for the property market to perform than you’d prefer, but again, if nothing has structurally changed with property investment and you can afford the mortgage, what’s the problem? Over the long term and through 7-10 year cycles, regardless of whether or not you think it’s fair, property goes ‘upwards and to the right’.
I caught up recently with Kieran Trass who is the author, and perfecter, of what could arguably be called the property owners bible.
His book, ‘Grow Richer with the Property Cycle,’ concentrates his expertise into a guide that every first home buyer, investor, or upgrader should reference regularly.
Using a ‘buy and hold’ strategy with property can be an incredibly effective wealth-building strategy. Exploiting a property cycles to gain the edge, while risky, can enhance returns with each move you make. As usual, none of this is advice, but if you’d like guidance fine-tuned for your situation, even if you don’t require a mortgage, book in a coaching session after you’ve made a time to speak with me here.
