JP Getty once said ‘When the economy is bad and everyone is selling, buy real estate and don’t sell whatever the critics, the cynics, the losers might say. That way you’ll end up truly wealthy.’
JP Getty was one of the world’s first billionaires. He also discovered oil, which no doubt helped!
His message was clear: buy when they’re selling and sell when they’re buying. It’s easy to say, but swimming against the current is very difficult. You need a strong belief that your approach is the right way to go. So how do you know when to dive in?
This above image of the real estate value cycle might help. It follows a predictable path similar to a wave – building, stabilising and crashing, followed by another wave. There’s a certain inevitability about the process.
Consider where you are now in this cycle and plot it on the diagram. Then take a look at the events that are about to come.
Keep in mind that these cycles take years to complete. The cycle may be fast (e.g. five years) or slow (10 years).
So how do you know when the cycle is changing? Interest rates are a useful indicator.
- Low interest rates are a major signal to start buying.
- High interest rates indicate that the Reserve Bank wants to slow down the economy, so that may be a good time to sell.
Perth is currently experiencing low interest rates, returning confidence and increased bank lending – which means this is the time to buy!
Whether you sell or hold the property is irrelevant. What’s important is how well you buy the property in the first place.
If you have any queries or would like assistance with the purchasing process, contact Alan Bourke or anyone from Bourkes on (08) 9474 2000.