How to spot a surging market

How to spot a surging market

A surging housing market can often be difficult to differentiate from a short term boom or strong selling season, however there are a few indicators to suggest a housing market is peaking. A surging housing market occurs at a phase in the property market cycle when housing prices have risen to their peak and will subsequently slow in the final stages of the property cycle. The best time to sell is in a surging market, when capital gain is at its highest potential.

Here are a few tips to spot a surging market:

  1. Look to the Property Wheel. The CPS Property wheel shows trends throughout different phases of the property market cycle. The peak phase can be identified through rising prices and falling yields, followed by an eventual slowing of activity, with confidence in the market remaining high.
  2. Differentiate between a short term boom and a surging market. It can be difficult to spot the difference, however one thing you can ask to differentiate the two is: Is the market currently in peak selling season? If so, wait a few weeks to see if conditions stabilise.
  3. Consider cuts to the interest rate. An interest rate cut re-instills confidence in a slowing market to make investing more affordable and more appealing. A cut to the interest rate is likely to be followed by a temporary swell in property prices with investors taking advantage of lower repayments on new investments. When the reserve bank announced a cut to the interest rate in May 2016, the Australian housing market swelled in the month following.

Dwelling values at 30 June 2016

corelogic-house-value-index-june-2016-1

Source: http://www.businessinsider.com.au/house-prices-in-sydney-are-still-rising-at-insane-levels-2016-7

Although there were predictions at the beginning of 2016 that the Sydney and Melbourne housing markets were going to soften, there has been no indicator yet of the markets slowing down. Both Melbourne and Sydney housing markets have remained strong and housing prices continue to rise leading into Spring, the peak selling season.

If you would like to discuss the current state of the housing market, contact CPS Property today.

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