‘Where are we in the 18 year property cycle?’ It’s easily been our most frequently asked question of 2021 so far – and we’re only in March!
This cycle is one of the core concepts every aspiring and experienced investor should be aware of. It guides us on when to invest and when to sit tight.
But as it’s been almost 12 months since the coronavirus rocked the entire world, it left many questioning whether coronavirus had broken the cycle completely.
So has it?
Let’s quickly recap on the 18-year property cycle
The 18 year property cycle has been happening for hundreds of years. It was proven by an economist who realised property markets in the UK & US go through a cycle that lasts 18 years.
Here are the key points to be aware of:
- After a crash there are four years of nothing, the market keeps ticking over.
- The next phase is seven years of modest growth.
- At the end of those seven years there’s a mid-cycle wobble that lasts between two to four years.
- Then we get the seven year boom phase, where property prices grow more than at any other point of the cycle.
- The final two years of this boom phase is called the ‘winner’s curse’ – because after this comes the crash!
It’s worth noting that the 18 years is an average and not definitive. Some cycles are longer and some are shorter. We’ve got a free course on the 18 year property cycle, if you’d like to delve deeper into the concept to help your understanding.
The current cycle
To find out where we are right now, we need to take a look at when the current cycle started.
The start of the current cycle was in 2009, after the 2008 financial crisis. So we’ll work backwards and have a look at how the cycle has played out so far.
Four years of nothing:
In 2009 property prices went up by 3.4%.
In 2010 they grew by 0.5%.
2011 had growth of 1.1%.
2012 dipped by 1.1%.
So across the four years after the crash, the average was less than 1% growth – less than inflation.
Seven years of modest growth:
Indeed there was a vast amount of growth over the next seven years:
2013 – growth of 7.1%.
2014 – growth of 8.3%
2015 – growth of 4.3%
2016 – growth of 4.5%
2017 – growth of 2.7%
2018 – growth of 1.3%
2019 – growth of 0.8%
The average growth across these seven years was 4.1%, which we’d say was pretty modest. During this period you might be able to pinpoint where we had the mid-cycle wobble from 2017 – 2019.
What happens next?
Stimulus drives the third phase of the cycle after the mid-cycle wobble. So if the 18 year property cycle is correct, then 2020 should have been the first year of the boom phase.
And we reckon that was indeed the case.
Property prices grew by 6.4% in 2020, which, for being in the middle of a pandemic, is pretty good!
So, the 18 year property cycle isn’t broken and we’re actually going into a second year of the boom phase. Which makes now an incredible time to buy.
Don’t get ahead of yourself
Before you go bonkers and buy anything you can get your hands on, it’s still important you make smart investment decisions and do your due diligence.
You need to make sure that your property strategy meets your goals and that any deal you look at has the key fundamentals.
If you’re still on the fence about going it alone in one of the most uncertain times of our lives, working with a property investment company might be the route for you. They’ll be able to do all the groundwork for you and bring you a solid deal – sometimes at a pretty hefty discount.
If you’re ready to invest, take a look at some of the past deals that Property Hub Invest have brought to our clients. If you like what you see, you can book a free strategy meeting with the team and start reaching your property goals.
By the end of the year you could have your first investment property and be on your way to building that portfolio.