Finding the best time to buy a home is important, no matter what sort of buyer you are, or how much you have to spend. That's where understanding the property cycles comes in handy. You don't have to memorise exactly what goes on in the market at every stage of the year, because a professional buyer's agent has already done that work for you. Simply take on the services of one and sit back while they do the legwork for you. For example, when there is high demand and low supply, as the market is showing now, dwelling values are being driven higher. In a market with low demand and high supply, there will be plenty of available homes and hardly anyone looking to buy, allowing prices to fall. That's a situation Australia is unlikely to find itself in for quite some time
It's commonly thought that the property market goes through a seven-year cycle of troughs and peaks, where prices rise and fall, and supply follows a similar trend. Nobody wants to buy when a price drop is just around the corner, but at the same time, sellers won't want to be listing their homes right before a fall because they won't be capitalising as much as possible.
At the same time, sellers would prefer to list just before a spike is expected, but buyers won't be searching at these points because they'll have to pay through the nose.
Finding a balance between these points for both buyers and sellers is difficult, but it does happen. Choosing the right time to buy also depends on how long you want the search to take, what your price ceiling is and how much competition you're comfortable facing.
What the seven-year cycle is really referring to ?
mortgage rates were reduced in 2011, which pushed more people into the buying market to take advantage of the conditions, but that has also led to more price growth that the construction of new dwellings can't keep up with.
To put the above Melbourne figures into perspective, the aggregate median dwelling value of the five major capital cities in Australia increased by just 10.15 per cent over the last 12 months to $755,500. Looking at houses, where Melbourne grew by 14.61 per cent, the aggregate value was only 10.07 per cent, and apartments in Melbourne rose by 7.89 per cent, but over the rest of the country it was 10.68 per cent. That last figure is a little out of proportion; however, as the Sydney increase in apartment values was 15.48 per cent as a retaliation to the extreme cost of a house in the city, and Perth's drop of 4.58 per cent, which is being seen as a result of the end of the mining boom in Western Australia.
What the seven-year cycle is really referring to, then, is not a peak and trough of expensive and cheap housing, but more regarding the way the price growth rises and falls. It's rare for the median price of housing in a city to fall rapidly, thus making property more affordable, because as soon as this starts happening, people will be more reluctant to list their homes, and buyers will be out in force trying to snag a bargain. With high demand and low supply, prices will just be pushed higher once more.
Therefore, it makes more sense to look at house price growth as the subject of this seven-year cycle. The actual cost of homes won't be dropping in a trough, in this case, but the amount the value of a home has grown over a period of time would be lower than in a peak. What that means is that a home might have increased in price from a year ago, but it won't have done so at the same rate it would have in a peak.
During a peak time, the price of a home would increase more rapidly than in a trough cycle, and this means the actual cost to the buyer would be more than would be expected in a period of lower growth.