Cycles of the real estate market: When is a good time to invest?

If we are able to understand what the phases of the real estate cycle are and at what point we are from the analysis of information on the real estate market, we should have the ability to foresee what will happen in the coming years and what to expect.

For example, if we know that we are at the beginning of the recovery phase of the cycle, we will know that there will be a long period ahead in which house prices will increase. Therefore, we will be much more confident in investing in a property, hoping that it will appreciate in the coming years.

On the contrary, if we determine that we are at the end of the period of expansion and the beginning of a period of oversupply, we will know that the recession will come sooner rather than later. Under this conclusion, surely, we will be more conservative when it comes to investing in a property, avoiding paying for a property that is overvalued. On the contrary, we may well decide to keep our money in a more liquid asset and even take advantage of that moment to sell a property before prices fall. Then, take advantage of the recession phase to buy properties at a much more reasonable price.

Where are we now?

After the 2008 crisis, property prices bottomed out a couple of years later. After that, the values ​​have been increasing consistently.

If the theory that we have reviewed in this article is true, we should see a peak in property prices in 2024 and experience the outbreak of an upcoming economic crisis around 2026. Thus, prices should bottom again near 2030.

Now, in a globalized world like the one we live in, the economy is naturally difficult to fully predict. Despite the fact that, as we have said, the real estate cycle over the years has been consistent in its duration, we are not in a position to ensure that the current cycle meets its agenda. The next economic crisis could well be precipitated earlier than expected, considering the complex dynamics that govern the world economy, such as the recent trade war between the US and China. The advice is to remain cautious by carefully observing the signals of the market and having as a reference what we have exposed in this post.