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There is certainly good money to be made through strategic investing. There are a lot of factors to consider to ensure you make a smart investment choice. One of the key factors we at Suburbanite focus on to unlock opportunities is the timing of the market.

Many people believe that the overriding factor is low interest rates and this is why the market is doing so well. However, Perth, Darwin, many regional and tourism markets as well as Tasmania have not been preforming well the past few years. In fact, Darwin and Perth have both been aggressively retracting in value in this time. Did someone forget to send them the memo that interest rates are low so values should be sky-rocketing?

Is it then down to larger economic forces, such as the mining boom that has impacted areas such as Perth and Darwin? Well it certainly is one factor. Historical trends and past economic influences, such as the global financial crisis (GFC), are additional factors to consider. Interestingly though our data shows that the Melbourne market had an average growth of 27% the year after the GFC.

We believe the biggest influencer of property market movement is the timing in the cycle. This overarches all other factors, and whilst we whole-heartedly agree that interest rates do have some impact on performance, as does local and global economic factors, these are just one piece of a much bigger puzzle.

Let’s explore a typical cycle. Above are the national averages over a typical 20 year cycle, for Australian capital cities. It is important to remember that not all markets are created equal and do not all perform the same. Regional areas, tourism hubs, oversupplied markets like new housing estates or new units in CBD areas are far more volatile than the graph represents. The trends I’m talking about reflect capital city housing markets.

The graph also highlights the stable part of the market where there is little to no growth in values which is usually about six to eight years of a cycle. We then see the active stage of the growth cycle where there is about three to four years of aggressive growth. There is typically a small correction of approximately 5% to 10% before the market goes back to the stabilisation stage.

So the idea is to buy at the lower part of the cycle but not too early or the property will sit flat for years before the investor sees any real growth. We also want to avoid buying at the peak or during the correction period.

It is important to note that during the correction period we often see vacancy rates rise quiet significantly which can make it hard for investors to hold the property if the rental returns aren’t stable.

Looking at Sydney and Melbourne for a moment, the average annual growth on a 10-year cycle, is approximately 8% pa on average for 10 years. Statistically speaking this means your property will more than double in value over a 10 year period due to the compounding effect. This indicates that these markets are at or very close to their peak. With some suburbs in Sydney starting to see negative growth trends come through in the past 12 months. This would be the first signs of a cooling market.

We are often asked about the opportunities in satellite cities such as Wollongong, Newcastle or Central Coast. These areas certainly do grow off the back of their neighbouring cities. For example, as people get priced out Sydney they search for a more affordable alternative like Wollongong.

These areas do tick a lot of these boxes but those looking to invest in these areas for 2017 have missed the boat. You needed to be buying there two to three years ago as the growth has already come through.

If you already own a property in NSW and bought two to five years ago, it is a great time to speak to your mortgage broker at CANE Financial about unlocking the sleeping equity you may have in your property as a deposit for an investment property. There are some fantastic opportunities however you need to get the right guidance so you don’t make a costly mistake. Strategic investing is about getting your money working for you so you can build more wealth for your future.

Anna Porter, Principal and Property Advisor, Suburbanite