A look at NSW property cycles.

Anyone who has been involved in property for any period of time knows that property prices move in cycles.

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There are growth fazes, followed by periods where prices consolidate or even slightly dip. The key to being a successful property investor is to understand that property prices might move between these phases, but over time the trend is always upward.

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New data from Domain, show us that during the last few years, property values have skyrocketed in Sydney.

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Home prices are up 40 per cent between June 2020 and March 2022 with house prices across all Sydney suburbs experiencing an increase in price over the past year, ranging from 6 per cent to almost 58 per cent.

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Source: Domain

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To put that in context, during the pandemic, house prices saw a daily increase of $708, which is far more than most people earnt from their 9-5 job.

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While previous upswings have seen greater rates of house price growth over a longer period of time the most recent one provided the quickest and sharpest equity boost Sydney has ever experienced.

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Now that the crazy level of price growth has subsided and conditions are coming back to a more normal level, it’s also worth looking at how the next phase of the market cycle has played out over the years.

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The last significant downturn was during 2017-19 when Sydney house prices fell 13.8 per cent from peak to trough. Interest rates weren’t rising at the time but it became harder to get a loan and less credit was available for borrowers, plus throw in a banking royal commission to add to the market jitters.

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Source: Domain

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Other market downturns have been far less severe and the six other periods where markets slowed down, saw prices pull back at most by just 6.5 per cent from their peak.

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Periods, where markets are pulling back, are often the time when you want to start looking for opportunities to purchase high-quality assets.

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During periods when prices are rising rapidly, there is a lot of competition for A-grade properties that are attractive to owner-occupiers. These types of properties were seeing significant premiums above guide prices over the past few years and pricing out all but the most aggressive buyers.

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When markets soften, there are opportunities for homeowners and investors to get into some of the most sought-after locations without the competition.

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The make-up of these areas will still be the same regardless of where the property cycle currently sits. They are still highly sought-after locations, with limited supply and a lot of high-income earners that are seeking lifestyle and convenience all rolled into one.

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These types of locations will likely not see huge falls in value, but they do see the premiums that buyers were paying come off those record-high levels as listings increase and buyers lose that sense of urgency that was present last year.

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That’s why it’s very important to make that distinction between value and price in slowing markets.

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Use this opportunity to buy wisely and do so with a long-term perspective. Get set on an A-grade property that could help set you up when the next growth phase takes hold.