Price Story: Your Guide To Real Estate Market Cycle

Being a home buyer, it is important to be familiar with the concept of how the property market works. Typically, the real estate works in a cycle which determines how the current period is, how it has performed and how it will be doing in the near future. It works like a regular clock on a fixed rotation basis. Prices rise, fall and then stabilise and then rise again. This is how property prices move — everything is transient. A property which is booming right now can become stagnant and thus the inventory gets piled up. To stabilise rates, the property market goes for a price correction. 

Demographics, economic condition and buyer's need deeply affect the property cycle. Investors, buyers and developers are the three stakeholders in the property market. To maximise profits, investors are always in a teary hurry to pick up the 'right' property and sell it at the 'right' time. For this, they depend on the property cycle.

Let's look at the four stages of real estate market cycle

The growth period

Increased confidence among homebuyers leads to a jump in sales. In this stage, one can witness a decrease in inventory and the prices just begin to rise. As a result of this, buyers are in a rush to buy a property. Simultaneously, developers come up with new project launches and lucrative offers. 

Market booming

An increase in property sales spurs demand and leads to a rise in property prices. This stage marks the top of the real estate market cycle. Generally, buyers mistake it with the short-term period. A property boom mostly lasts as this the time, developers make a windfall gain. Not only the property prices get doubled but the rentals also hit the rooftop.

Nosediving

This is the longest period in the real estate market cycle. It stays for a very long period, at least for many consecutive years. The longer the booming phase prevails, the prolonged is the slump. Many sit on the fence with a hope to invest when the prices fall. In contrast, prices stay stagnant for an indefinite period. 

Recovery or stabilisation

The recovery stage generally lasts for a short period as compared with boom and downfall. In this stage, the selling process takes the front seat and happens swiftly. As the market is stabilised, the rent prices remain increased and also the property prices look up again but at a slower pace. 

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