The Four Stages of the Property Cycle

For property investors, understanding the property cycle has long been considered essential, acting as a guideline in helping identify the best times when to buy, hold, and sell, in anticipation of what comes next. We will give a simplified overview of each stage but also keep in mind, this isn’t always Australia wide. Although there may be some macro forces at play, each city and region can have their own cycles and trends.

Stage 1: The Property ‘Boom’.

Supply: Mid-High
Demand: High
This is the stage that investors eagerly anticipate. Property prices grow rapidly, demand peaks, and clearance rates soar. If you’re looking to sell, this is a popular time to do it.

Usually lasting just 1-2 years, this phase prompts investors to closely monitor the closing stages of the previous cycle, to act swiftly and capitalise on the boom effect before it ends.

Stage 2: The ‘Downturn’.

Supply: High
Demand: Mid-Low
Following a property boom, demand eventually drops, while the supply stays high due to activity from developers. This leads to the downturn phase, marked by signs such as increased vacancy rates and declining rental prices. It’s not uncommon to see a decline in property prices, and developers may face redundancies and financial vulnerabilities.

This phase can lasts 3-4 years and can stretch longer following a prolonged ‘boom’.

Stage 3: The ‘Stabilisation’ Period.

Supply: Mid
Demand: Mid
During the stabilisation stage, the market adjusts to an excess of property supply and reduced demand. Interest rates tend to decrease, and property values begin a gradual recovery.

This period can be an opportune time for investors, as lower prices and reduced market competition make it an appealing time to buy.

Stage 4: The ‘Upturn’.

Supply: Mid
Demand: High
As buyers return to the market, competition increases, driving down vacancy rates and pushing up rental and property prices. Developers start significant projects, aiming to complete them as the boom phase hits.

The upturn typically lasts 3-4 years as property prices grow, setting the stage for the next ‘boom’.