Real Estate Investor Magazine South Africa April 2015 | Page 17

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ear-on-year and monthon-month property data
in the mainstream media
entrenches a short-term perspective
that obscures a far more useful
measure: the reality that property
markets, like all economic markets
and variables, move in long-term
cycles. Savvy property investors
with a long-term perspective
use this knowledge to improve
the quality of their investment
decision-making.
One of the fundamental basics
of economics is that markets move
in cycles. Markets experience boom
times, followed by a period of
market correction and a downturn,
before a recovery period ushers in
the next boom. This is a natural
phenomenon evident in all
markets, and whether it is called
“boom and bust”, “bulls or bears”,
“upturn or downturn” or simply
“peaks and troughs”, investors can
be absolutely certain that neither
a boom nor a downturn in any
market will last forever.
In fact, the phases of the property
cycle and the general characteristics
of each phase of the cycle are so
clear from a long-term perspective,
that it has been codified in what in
commonly known as the property
clock, and the typical characteristics
of each phase have been welldocumented.

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Characteristics of the
Boom Phase
• Demand exceeds supply
• Rapidly rising prices
• Low interest rates
• Credit and mortgages
are easy to obtain
• Rising construction and development
• Yields decline
In the boom phase, the news flow
is buoyant and positive. Novice
investors buy excitedly, and are even
prepared to overpay, just to get into
the property market. First-time
buyers with easy access to credit –
even to 100% loans - at affordable
re