Understanding the property clock is a smart move for anyone thinking about putting money into real estate. Think of the property clock cycle like the hours on a watch – it shows the different stages the property market usually goes through over time.
According to Herron Todd White’s Monthly Property Clock, cities move through these phases at different times, creating unique opportunities for investors. Knowing where the market is on this real estate clock can give you important clues. It helps you make better choices about your investments within the various property investment cycles.
This article will walk you through the basics of the property clock. It will give you the key signs to watch for and how this knowledge applies to different types of investments, including newer options like coliving properties.
How the Property Market Cycle Works
The real estate market cycle is a pattern that repeats. It’s mainly driven by how many properties are available versus how many people want to buy them (supply and demand). It also takes into consideration the overall health of the economy and how confident buyers and sellers are. While how long each stage lasts can change depending on the area and the economy, the cycle often looks like a clock face, hence the term “property clock”:
- 12 o’clock (Peak) – The market is at its highest point. Prices are strong, lots of people want to buy and properties sell very quickly.
- 3 o’clock (Downturn) – Growth starts to slow down. Prices might stop rising or even drop a little. Fewer buyers are actively looking.
- 6 o’clock (Bottom/Slow Time) – The market is at its lowest point or not doing much. Prices are steady or dropping slightly. There might be more properties for sale than buyers.
- 9 o’clock (Recovery) – The market starts to improve. More people start looking to buy, there are fewer properties for sale and prices stop dropping or start to rise a bit.
Knowing what usually happens in each stage of these property investment cycles will help you know what to expect and plan your investment approach.
Important Signs and What They Mean
- Lengthy planning and approval processes – Delays in local and state development approvals can hold up new rental housing for years.
- Skilled labour shortages – The construction industry continues to face shortages in qualified tradespeople, slowing down build times.
- Rising material costs – Inflation and supply chain issues have driven up the cost of building, affecting affordability for both developers and tenants.
- Limited land availability – In major metro areas, land suitable for development is scarce or highly contested.
- Community pushback – Local opposition to higher-density housing often results in fewer rental developments in key locations.
Important Signs and What They Mean
To figure out where a market is on the property clock, keep an eye on these key signs:
- Average Property Prices – Are they going up, down or staying the same? Look at past prices and what’s happening now.
- How Many Properties Are Selling – If lots of properties are selling, it can mean the market is getting busier (moving towards the peak). If sales are slow, buyers might be waiting (moving towards the bottom).
- Number of Properties for Sale – If there aren’t many properties for sale but lots of buyers, sellers have the advantage (near the peak). If there are many properties but few buyers, buyers have more power (near the bottom).
- Empty Rental Properties (Vacancy Rates) – This is big for rental investments like coliving.
- Low vacancy: Lots of people want to rent, good for landlords.
- High vacancy: Might be too many rentals or less demand.
- How Much Rent Costs (Rental Yields) – Are rents going up or down? Rising rents mean the rental market is strong, which helps your income from a rental property.
- Money Matters (Economic Factors) – Things like interest rates (how much it costs to borrow money), job numbers and how confident people feel about the economy all affect property. Higher interest rates can make it harder for people to borrow and buy.
- New Buildings and Plans (Infrastructure and Zoning) – New roads, public transport or changes to what can be built in an area can make it more popular and affect property values.
Identifying the “Right Time” to Invest
While it’s hard to pick the perfect moment, understanding the cycles of the property market will help you make smarter timing decisions.
During a Slow Market (Property clock near 6 o’clock)
You might find properties for a lower price. However, prices might not go up much quickly and finding renters could be harder.
During Recovery (Property clock around 9 o’clock)
This can be a good time to buy as prices are starting to rise.
During a Busy Market (Property clock towards 12 o’clock)
Prices are going up fast, but you’ll have more competition from other buyers.
Near the Peak (Property clock around 12 o’clock)
Be careful here, as the risk of a downturn increases.
Thinking long-term is often the best approach, as it helps you ride out the ups and downs of property investment cycles.
Let INVIDA Show You The Way
The property clock serves as a valuable framework for understanding the natural rhythm of the real estate market. By watching the key signs and indicators, investors can get a better idea of the current market stage and make more strategic decisions.
Whether you’re looking at traditional properties or exploring newer options like coliving, using the property clock is a good idea. Understanding property investment cycles is a key part of navigating the market well and working towards your financial goals. To understand where the market stands and how to make your next move count, reach out to INVIDA – we’re here to guide your investment journey..
